Stronger than expected jobs data spurred a sharp rally for the Kiwi today!
Is this a pullback opportunity materializing on NZD/JPY?
Before moving on, ICYMI, yesterday’s watchlist looked at AUD/NZD forming a double bottom ahead of the NZ jobs report. Be sure to check out if it’s still a good play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
Canadian Ivey PMI climbed from 56.3 to 56.5 vs. estimated dip to 55.0 in January, reflecting faster pace of industry growth despite dip in employment and inflation components
BOC Governor Macklem reiterated that they need more time to bring down inflation, as housing shortfall is contributing to higher price pressures
New Zealand GDT showed a 4.2% jump in dairy prices during latest auction vs. earlier 2.3% increase
New Zealand Q4 2023 employment change at 0.4% q/q vs. estimated 0.3% uptick, earlier period’s reading upgraded from -0.2% to -0.1%
New Zealand jobless rate ticked higher from 3.9% to 4.0% vs. 4.3% forecast despite strong migration inflows
New Zealand labor cost index jumped 1.0% q/q vs. estimated and previous 0.8% uptick, reflecting stronger wage pressures
German industrial production sank 1.6% m/m in January vs. estimated 0.4% dip, following previous 0.7% slump
U.K. Halifax HPI came in stronger than expected with 1.3% m/m increase in prices vs. estimated 0.8% uptick and earlier 1.1% gain
Price Action News
Overlay of NZD Pairs vs. Major Currencies Chart by TradingView
The Kiwi had already been enjoying some gains leading up to New Zealand’s quarterly jobs release, and the actual report triggered a sharp pop higher across the board.
Not only did the headline employment change figure beat estimates, but the unemployment rate and labor cost index also came in stronger than expected. All in all, these reflected a very robust jobs market and upside inflationary pressures, suggesting that the RBNZ might stick to a hawkish stance for much longer.
On the flip side, a bit of a pullback was seen on the U.S. dollar, as traders likely booked profits from its rallies earlier in the week. In addition, expectations of additional stimulus from China also kept risk-taking supported.
Upcoming Potential Catalysts on the Economic Calendar:
Swiss foreign currency reserves at 8:00 am GMT
EIA crude oil inventories at 3:30 pm GMT
FOMC member Kugler’s speech at 4:00 pm GMT
FOMC member Barkin’s speech at 5:30 pm GMT
FOMC member Bowman’s speech at 7:00 pm GMT
Chinese CPI and PPI at 1:30 am GMT (Feb. 8)
Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! ️
NZD/JPY 15-min Forex Chart by TradingView
This forex pair bust through the near-term resistance at the 90.20 area then zoomed up to R1 (90.35) upon seeing strong jobs data from New Zealand.
After all, the surprisingly upbeat figures could mean that the RBNZ won’t be thinking of cutting rates anytime soon, unlike most of its major central bank peers.
At the same time, expectations of more stimulus from China are propping up commodity currencies, especially since President Xi already met with regulators earlier this week.
Traders seem to be booking profits off the latest NZD/JPY rally, though. Price is inching close to the 38.2% Fib, which happens to coincide with the broken resistance zone that might now hold as support.
A larger pullback could find buyers at the 50% Fib that lines up with the pivot point level (90.09) or the 61.8% Fib closer to the 90.00 major psychological support.
The 100 SMA is above the 200 SMA to suggest that the path of least resistance is to the upside, but Stochastic is just starting to make its way down to signal that sellers are regaining the upper hand.
If any of the Fibs are able to keep losses in check, NZD/JPY could recover to the swing high or even up to R2 (90.51), but a break below these could pave the way for a test of the lows near S1 (95.91).