New Zealand Dollar surges broadly after surprisingly strong employment data. Unemployment rate dropped -0.5% to 3.9% in Q3 versus expectation of 4.4%. That’s the lowest level in a decade since June 2008. Employment rate rose 0.5% to 68.3%, highest since the series began 30 years ago. Participation rate also rose 0.2% during the quarter to 71.1%. Employment grew 1.1% qoq versus expectation of 0.5% qoq.
The set of strong data came in just a day ahead of RBNZ rate decision. RBNZ is widely expected to keep OCR unchanged at 1.75%, without a doubt. The tone of the accompanying statement is the key. RBNZ Governor Adrian Orr has sounded rather dovish in his recent comments, even being open for a cut as next move. The upbeat data will likely be reflected in the communications and thus, at least, remove some bets on RBNZ cut.
Recent rally in NZD/USD is in line with the case of bullish trend reversal. This is supported by the strong break of 55 day EMA, bullish convergence condition in daily MACD and current upside acceleration. Focus is now on 38.2% retracement of 0.7436 to 0.6424 at 0.6811, which is close to 0.6779 support turned resistance. Decisive break of this resistance zone will confirm reversal and target 61.8% retracement at 0.7049 and above. However, rejection from 0.6779/6811, followed by break of 0.6610 support will revive bearishness and bring retest of 0.6424 low.
