Surprise in New Zealand

Most of Wednesday unfolded as expected, with, once again, Dollar and Yen gaining appreciating. Gains were not as strong as before, but large enough to be noticeable and bring some pips. Early Thursday, very early Thursday (still only Wednesday here), brought a surprise. Employment data was released in New Zealand, and, just like last time, Kiwi responded strongly. Difference is, that today NZD strengthened, quite dramatically in light of latest market action, while in February it dropped like a rock.

Unemployment in New Zealand fell from 7.1% to 6.0%, significant improvement. Expectation is that these news will pave way for rate increase by RBNZ sooner that previously speculated. Whether it will happen during next policy meeting on June 10, it remains to be seen, but evidently markets anticipate a hike in cash rate. One must remember, however, that new budget will be revealed on May 20 and this could produce additional surprises, depending on how restrictive it gets. Regardless, today New Zealand Dollar registered strong gains.

I had interest in these news, because of my trades involving NZD. Given recent history of how much employment data effected currencies, and unpredictable nature immediate market responses, decided to close trades before announcement. One of them was short in NZD-JPY, which was posted yesterday.

Entry was a move under 67.80, or 67.78 to be precise. Objective was 100 pips. Market moved, in a fairly sharp fashion, but short of my target. price bounced at 100 SMA. By the time candle closed, (4H chart was used for the set up), it was getting close to employment news and trade was closed, for a gain of 52 pips. On the plus side, couple of other trades I took in Yen pairs worked out just fine. But that was not the case with my other Kiwi trade, this one in GBP-NZD.

Here I was hoping for a quick resolution, with entry just under 2.1100. Order was filled , but no progress took place. By the time of news release, trade was closed for 95 pips loss. And not too soon – market plunged additional 200 pips soon after.

After considerable wait, EUR-GBP sell order was finally filled yesterday, and today price reached my objective. With an entry at 0.8597, market has a good chance to see 0.8400, next support, but I wanted to get 100 pips on this swing. Should market continue lower, I will be looking at hourly charts for smaller target opportunities. Decided not to post new orders today, because I’ll be gone all day tomorrow thus unable to update the blog. Just want to point out, that on Friday we have employment data released in USA – non-farm payroll figures. Number different from estimate (177 K) can easily move all USD pairs, as well as Yen crosses. Something to keep in mind.

Mike K.
www.fxmadness.com