Wednesday, August 3, 2011

New Zealand Employment Change Data - 3 August 2011

New Zealand Employment Change Data - 3 August 2011

New Zealand’s Employment Change is usually reported quarterly, although it is always considered late by the standards of other countries, it is the ONLY indicator available from the Statistics of New Zealand on Employment, and sometimes when we get strong deviations, market tends to move unchallenged…

6:45pm (NY Time) NZ Employment Change

Forecast 0.1% Previous 1.4%

NZ Unemployment Rate Forecast 6.5% Previous 6.6%

ACTION: BUY NZD/USD 0.5% / SELL NZD/USD -0.3%

The Trade Plan

The deviation that we are looking for is at least of 0.4%. Expect to see the effect of this news to last minimum of 45 minutes; typical news effect should last under 2 hours, but due to the low liquidity condition and the fact that other markets are opening around the release time, the effects of this release may be affected. One other important news to pay attention to is the Unemployment Rate, which is expected to drop to 6.5%. If we don´t get a conflict with the Employment Change, then we will proceed with the trading plan.

We´ll look to trade this using after news retracement trading method, we´ll wait for the market to retrace and stay out of the market during the release time. If we get a 0.5%of release, our bias will be to BUY NZD/USD; if we get a -0.3% of release, our bias will be to SELL NZD/USD. We´ll only enter after we see a decent retracement from the initial spike.

The Market

NZD has been in high demand due to its fundamental outlook… as a matter fact, RBNZ recently commented on the possibility of resuming the interest rate tightening policy set before the Earthquake, which added more demand for the currency… even though the 50 basis point, or 3.00% rate outlook, has been priced into NZD’s value, I believe market may very well push NZD above the 0.9000 against USD this year.

The Labor Cost Index q/q released on Monday indicated a 0.5% of rise, following two consecutive quarters of 0.6% gains. It is a sign of wage to growth, therefore I’d expect to see a slightly better or inline employment number today…

Additional Thoughts

NZD may not retrace much during lower liquidity hours, therefore we may have to get in as soon as possible on a strong release. The overall outlook for NZDUSD positive, therefore I’d recommend to BUY on any dips.

Pre-News Consideration

There are no pre-news consideration for this trade.

Definition

“The Household Labour Force Survey (HLFS) started in October 1985, and the first results published were for the March 1986 quarter. The survey provides a regular, timely, and comprehensive portrayal of New Zealand’s labour force. Each quarter, a range of statistics relating to employment, unemployment, and people not in the labour force is published.”

by Henry Liu