NZD/USD targets 0.6700 after a surprise New Zealand unemployment rate data

NZD/USD targets 0.6700 after a surprise New Zealand unemployment rate data
Written by:
Crispus Nyaga
5th August, 04:33
  • The NZD/USD pair rose after Statistics New Zealand released mixed employment numbers.
  • The data showed that the unemployment rate declined to 4.0% from the previous 4.2%.
  • However, wages dropped even after the government increased the minimum wage in Aprill.

The NZD/USD pair sparked higher as traders reacted to relatively strong employment numbers from New Zealand. The overall weaker US dollar has also contributed to the rise. The pair is trading at 0.6646, which is slightly higher than this week’s low of 0.6580.

New Zealand dollar
NZD/USD rises after better jobs data

New Zealand unemployment rate falls

Many analysts have praised the New Zealand government for how it handled the coronavirus pandemic. The country of near 5 million people recorded just 1,500 cases and 22 deaths. Also, the country has recorded less than 20 new cases in the past two months. This is the opposite of what is going on in Australia, where the number of cases has started to rise.

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The impact of New Zealand’s response is now visible in the labour market. According to Statistics New Zealand, the country’s unemployment rate fell to 4.0% in the second quarter from 4.2%. This was a surprising figure considering that analysts polled by Reuters were expecting the rate to spike to 5.8%.

In comparison, the rate of unemployment in other countries has been relatively weak. For example, in the RBA interest rate decisionyesterday, the bank said it expects the rate to jump to 10% this year. Similarly, the unemployment rate in the US and the European Union is at 11.1% and 9%, respectively. In a statement, Sean Broughton of Statistics New Zealand said:

“During the June 2020 quarter, some people weren’t actively seeking work due to the COVID-19 lockdown. Near the end of the quarter, the unemployment rate may have increased because more people sought work as New Zealand moved down the alert levels and restrictions were eased.”

Other numbers showed that the number of people not in the labour force increased by 37,000 while the number of those employed fell by 11,000. At the same time, the number of hours worked declined by a record 10.3% while underutilisation rose to 12%.

Wages, which are important measures of the economy, rose 0.2% in the quarter. That was the slowest rate of growth since December 1994. It happened even after the government increased the minimum wage from $17.70 to $18.90. Aaron Black, a senior official at the bureau said:

“Without an increase in the minimum wage in the June 2020 quarter, the headline LCI all salary and wage rates would’ve been flat over the quarter, and 1.8 percent over the year.”

NZD/USD technical outlook

NZD/USD technical forecast

The daily chart shows that the NZD/USD pair has been in an uptrend after bottoming at 0.5472 in March. The pair has climbed by more than 16% in the past three months. This makes it one of the best-performing pairs in the developed world. The price is above the 50-day and 100-day exponential moving averages. It is also slightly above the support of the equidistance channel shown in green.

Therefore, the price is likely to continue rising as bulls aim for the upper side at 0.6700. On the flip side, a move below the lower support may mean that bears have prevailed, which will see the price continue to fall.

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