Should you buy the NZD/USD after strong New Zealand jobs data?
- The New Zealand dollar tilted lower after the strong New Zealand jobs data.
- The country’s unemployment rate declined to 3.4% in the third quarter.
- The pair will likely maintain the bearish momentum.
The NZD/USD price was little changed in early trading on Wednesday as investors reflected on the latest employment data from New Zealand. The pair is trading at 0.7118, where it has been in the past few days.
New Zealand jobs data
New Zealand’s economy did relatively well in the third quarter even as the country saw more Covid-19 cases and went into lockdown.
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According to the statistics agency, the country’s unemployment rate declined from 4.0% in Q2 to 3.4% in the third quarter. This decline was better than the median estimate of 3.9%. It was the lowest it has been since the pandemic started. Also, the country has now created more jobs than before the pandemic started.
Meanwhile, the labour participation rate increased from 70.50% in Q2 to 71.20% in the third quarter. Again, this increase was better than the expected 70.60%.
Additional data showed that New Zealand’s labor cost index rose from 2.2% to 2.5% on a year-on-year basis.
This performance was a sign that the country’s economy is doing better than expected even after the latest Covid lockdowns. As such, with inflation also rising, the RBNZ will likely continue with the hiking cycle.
Meanwhile, in a recent statement, the Reserve Bank of New Zealand (RBNZ) said that it had a small role in the recent high home prices. This is after the average asking price for a home rose to more than $993,135 in October. This makes New Zealand to have one of the highest home prices.
The next key mover for the NZD/USD will be the upcoming Federal Reserve interest rate decision. The bank is expected to leave interest rates unchanged. At the same time, the Fed’s dot plot will likely signal that interest rates will rise several times by 2024. The bank will also start tapering its asset purchases.
On the two-hour chart, we see that the NZD/USD pair moved below the key support level at 0.7130 on Monday. The pair had struggled to move below this price several times before. The pair has then done a break and retest pattern and is currently at that level. It has also moved below the 23.6% Fibonacci retracement level while the MACD has dropped below the neutral line.
Therefore, the pair will likely resume the downward trend as bears target the next key support at 0.7035, which is along the 50% retracement level.
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