NZD/JPY balances on key Fibo support with all eyes on the RBNZ and risk sentiment
- NZD/JPY is resting on a key support level ahead of the RBNZ today.
- NZD/JPY bounced yesterday on the unemployment surprise data.
- Global trade conditions and a dovish sentiment surrounding the RBNZ has weighed.
The Kiwi is under pressure today ahead of the Reserve Bank of New Zealand, (RBNZ), as the Dollar finds demand while markets try to stabilise following a blow-out on the back of the heightened trade war headlines at the start of this week.
The Chinese have said that they are committed to not allowing the CNY to depreciate and Larry Kudlow announces intentions to meet with the Chines in September for trade talks to continue. This has given some relief to markets, but this time, there is is still an air of pessimism lingering and US benchmarks are not convincing on their small percentage corrections.
Popular yen risk crosses
The Yen is giving back some ground to the Dollar, but not so much on the crosses, especially the commodity currencies. CAD/JPY is flat following a sharp top-side spike that got sold into. EUR/JPY has found a bid as stocks try to recover but is hardly convincing, just +0.46% higher when EUR/JPY was able to rally over 1.8% on the EM-FX-roll out back into EUR. AUD/JPY is a touch higher on the RBA statement pointing to a cut in Oct as opposed to one sooner in September.
NZD/JPY found a bid yesterday on the jobs data where the unemployment rate fell to an 11-year low in June, despite signs elsewhere of a softening in labour market conditions. "Wage growth appears to be picking up even beyond the large minimum wage hike," analysts at Westpac explained.
New Zealand labour market summary
- The New Zealand labour market has defied expectations of a slowdown, with the unemployment rate falling to an 11-year low of 3.9% in the June quarter.
- Employment growth was solid, with the surprise being the lack of an accompanying rise in labour force participation.
- Wage growth was boosted by this year’s large increase in the minimum wage, but underlying growth looks to have picked up a little as well.
"The results won’t stand in the way of an OCR cut tomorrow, though they reduce the risk of a follow-up move in September,"
analysts at Westpac argued.
NZD/JPY levels
NZD/JPY has been consolidating on the 69 ahead of the RBNZ today with much of the central bank theme already priced. In there is a bigger risk of a relief rally on anything less dovish than expected than there is of a major decline in the bird. However, NZD/JPY carries the risk-off trade where the Yen attracts safe-haven flows and in a continuation of the downside, depending on geopolitical tensions, a break of the 50% Fibo of the 2019 range and 69 handle opens risks to 55.02, being the 78.6% Fibo of the same 2019 range. On the upside, the 75 handle comes into lay ahead of the prior 23.6% Fibo that is located at 82.25.