Chart in focus EURNZD short (Swing trade - Medium term)

Technical Analysis

Author: Giles Coghlan | eurnzd


New Zealand has had a stellar run from Tuesday's data release. Unemployment levels have reached a ten year low at 3.9%. See the chart below. This was an unexpected fall with market expectation of 4.4%.

Wage growth increased too with average hourly earnings up +1.4% q/q vs +0.8% q/q

The key labour data looked like this.

Labour market at a glance

  • Unemployment rate fell to 3.9 percent.
  • Underutilisation rate fell to 11.3 percent.
  • Employment rate rose to 68.3 percent.
  • Filled jobs rose 0.3 percent.
  • Average ordinary time hourly earnings rose to  $31.34.
  • Wage rates increased 1.8 percent annually.

A positive surprise for the NZD

The Policy assessment summary from the release statement felt like a little more upbeat than might otherwise have been expected. You can read it here below.

GDP is expected to rise and Orr said  that he would consider a rate cut if GDP fell short of projections. ( So take a mental note that GDP data is key for the NZD going forward - next GDP release is December 19). Therefore, given the fact that GDP is expected to increase and inflation data is expected to rise as well, there is a shift of bias from expected dovish to cautiously watching the data. To me this is a shift, albeit tentative positive notes,  and buying NZD dips makes sense. I like a NZD long swing trade.  Also take note that the bank is focusing on weaker business sentiment as a risk factor going forward. If that dissipates then we may see more optimism return for the NZD. EUR/NZD Short looks good pairing the negative EURO growth story with a more upbeat/ less bearish RBNZ. Look to enter at the 100 or 200 EMA on the 1 hourly chart.  The S1 Daily pivot and 1.7100 convergence level is my  preferred entry level.

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