8/2/2021

This week is a big week for the pairs in the Pacific as NZ is to report their unemployment rate and employment change tomorrow while Australia will report their rate statement on Tuesday followed by statement by Regional Bank of Australia governor Lowe on Thursday. Tomorrow's jobs numbers will undoubtedly shape the bias for the rest of the week, and forecasts suggest a beat in NZ's expectations.

Our outlook

I do think New Zealand has the potential to beat job expectations based on a few things: We are seeing a large jump in the civilian participation in the labor force and an increase in part-time jobs. Wages are also higher than ever since July 2018. Although we are seeing a small decline in full-time employment, the rate of growth in part time is outpacing the full-timers. Labor participation rate is as high as it was in January of 2020 (pre-pandemic), and the employment rate is 0.4% away from reaching "normal levels" again.

Employment rate NZD

Full-time employment

Part-time employment

One thing that concerns me is the number of job vacancies which stands at an all time high since 2008 at 256 index points, 84 points higher than January 2021. This is definitely a long term problem for NZ, but for this week, a beat in expectations looks good for the kiwi, although I do think it will be close.

With the Australian lockdowns getting a longer extension to next Sunday after it was supposed to end tomorrow is just another bump in the road for their economy. This week of minimal productivity in Australia seems like it will be a pretty obvious assumption that the economy and the buck will hurt this week making the kiwi look like a much more attractive option.

Trade Setups

Just in case I'm completely wrong in my outlook, I'll show two different ways to trade these pairs both ways on a beat or a miss.

AUDNZD

AUDNZD showing signs of weakness on the 4H as lower lows continue to form. It is still in a long term support level from February of this year, so there could be potential of a bottoming here, but I find it more likely that the pair will keep touching lower at least for this week. Should NZ's job expectations miss, the pair could run up to the resistance level around and test it at 1.05980.

AUDNZD on the 1D chart gives us a better look at the key resistance in the way. Should price pull all the way back to 1.05980s, we could see a retrace back to the lows.

NZDUSD

NZDUSD on the 4H chart looks bullish from here as higher lows and highs are formed in a rising channel. A beat in expectations could move the pair to the top of that channel, but a miss would probably mean a test on the support of the bottom of the channel or a break to the 0.69464 level.