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NZ Jobs data and NZDJPY

Following gloomy news yesterday that almost 1 million Australians have lost their jobs and ahead of employment data in the U.S. and Canada, temporary respite this morning as New Zealand Q1 employment data beat expectations.

The key number, the unemployment rate, rose from 4% to 4.2%, less than the 4.6% the market was looking for. The lower rate partially reflects the NZ economy was on a sturdy footing before the pandemic emerged and also measurement issues. (StatsNZ has previously acknowledged the challenge of collecting reliable data from the economy in lockdown.)

Significantly the Q1 data failed to capture the sharp rise in unemployment that has followed the New Zealand government instigating some of the world’s toughest Level 4 lockdown laws. Economists project that as a result, the unemployment rate will jump to 10% by year-end.

The economic impact and social costs of rising unemployment against a backdrop of just two new COVID 19 cases in New Zealand today, will result in an intensification of calls for lockdown restrictions to be eased from Level 3 to Level 2 next week.

Unfortunately, this won’t be enough to revitalise demand or the jobs market back to where they were pre the pandemic. Hence a doubling in the size of the RBNZ’s quantitative easing (QE) program to $60bn at the May MPS next week appears imminent with negative interests to follow. This is likely to result in some headwinds for “the Kiwi” including NZDJPY.

As can be seen on the chart below NZDJPY has been capped on three separate occasions since mid-March by a band of resistance 66.20/50 area, which includes the 50% Fibonacci retracement, a structure that warrants a medium term mild bearish bias.

In the short term NZDJPY is holding above support (trendline and recent lows) 64.00/63.70 and this should be respected. However should a break/close below this support occur, it would confirm the bearish bias and project a move initially towards 63.00 and then towards 61.60.

NZ Jobs data and NZDJPY

Source Tradingview. The figures stated areas of the 6th of May 2020. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

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