NZD/USD steady as hopes of negative rates in New Zealand fade

The NZD/USD price held steady close to the highest point since April 2018 after New Zealand released relatively strong employment data. The pair rose to an intraday high of 0.7225.

New Zealand economy is doing well

New Zealand has become famous for its handling of the coronavirus pandemic. The country recorded about 2,300 Covid-19 cases and about 25 deaths. This was significantly better than the figures recorded by peer countries.

As a result, the country’s economy did better than that of many countries. It bounced back by 14% in the third quarter after dropping by about 12% in the second quarter.

The NZD/USD rose after the country’s statistics office released relatively strong jobs numbers. In total, the employment change increased by 0.6% in Q4 after falling by 0.8% in the previous quarter. The median estimate was for the change to drop by another 0.8%.

The unemployment rate declined to 4.9% in Q4 from 5.3% in the previous quarter. Therefore, as the economy reopens, there is a likelihood that the rate will move below 3% later this year. Further, the participation rate rose from 70.10% to 70.20%.

Wages also continued to rebound. The labour cost index increased from 0.4% to 0.5% in the fourth quarter. It rose at an annualised pace of 1.5%. The strong numbers mean that the Reserve Bank of New Zealand (RBNZ) will not have an incentive to cut.

These numbers are mostly because many New Zealand companies continued to reopen in the fourth quarter. Still, many companies like those that depend on tourists and business travelers have yet to reopen fully.

Looking ahead, there is no major scheduled data from New Zealand this week. As a result, forex investors will focus on the employment numbers from the United States. The Labour Department will publish last week’s jobless claims numbers tomorrow. And on Friday, the department will release the official nonfarm payroll numbers.

NZD/USD technical outlook

The NZD/USD reached the year-to-date high of 0.7305 in January. By then, it had risen by more than 33% from the 2020 low of 0.5470. On the daily chart, the price has been in consolidation mode in the past few weeks.

During this time, it has formed a triangle pattern. It remains above the 25-day and 50-day exponential moving averages (EMAs). Therefore, in the near term, the pair will likely break-out higher. If this happens, the next key level to watch is the year-to-date high of 0.7305.