AUSTRALIA DATA: Consumer Recovery In Place, RBA On Hold

The overnight range was 177.24 - 177.98, Asia is currently trading around 177.60. The pair's surge higher ran out of steam as it approached the 179.00 area. The move is starting to look a little stretched as it flirts with levels not seen since the early 1990s but I suspect dips will continue to be supported in the short-term though as the trend remains your friend. The first support is back toward 1.7650 and then the more important 174.00-175.00 area.

Fig 1 : EUR/JPY Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

Q3 jobs and wages data are released Wednesday and with spare capacity an important driver of monetary easing, will be monitored closely as there has been excess supply in the labour market. Monthly data in the quarter signal there was a stabilization but employment is likely to have remained soft. The unemployment rate is expected to rise 0.1pp to 5.3%, in line with the RBNZ’s August projections. A 25bp cut on 26 November is generally expected but if the labour data print significantly weaker, then expectations of 50bp may increase.

• Q3 filled jobs, vacancy and survey data all point to a stabilisation in NZ’s labour market. Average filled jobs rose 0.1% q/q after falling 0.4% in Q2.

NZ filled jobs vs employment q/q%

Source: MNI - Market News/Statistics NZ/LSEG

• In its August projections, the RBNZ forecast flat Q3 employment growth leaving the annual rate down 0.3%. It also expected private wage growth to moderate to 0.4% q/q from Q2’s 0.6%.
• Bloomberg consensus is forecasting employment to rise only 0.1% q/q and still be down 0.2% y/y with expectations in a fairly narrow range of -0.1% to +0.3% q/q. ASB, Kiwibank and Westpac are below consensus but in line with the RBNZ projecting flat jobs growth in Q3, while BNZ is at +0.1% q/q and ANZ +0.2% q/q.
• Forecasts for the unemployment rate are between 5.2% and 5.4% with ANZ, BNZ, Kiwibank and Westpac all expecting 5.3% but ASB is steady at 5.2%.
• Soft labour demand is likely weighing on private wage growth which is forecast to rise around 0.4% q/q after 0.6%. ASB, BNZ and Kiwibank are all in line with consensus, while ANZ and Westpac expect 0.5%.

The BBDXY range overnight was 1219.82 - 1222.54, Asia is currently trading around 1222, +0.10%. The USD continues to build on its recent gains eking out new highs every day. The 1220-30 area remains tough resistance, only a sustained close back above 1230 would start to challenge the conviction of the longer-term USD shorts. Risk/Reward does still favour fading this moving initially but the price action is starting to look more constructive as higher lows are being made on the Daily chart through October. A sustained move back above 1230 would potentially signal a medium term low is in place and a deeper pullback is on the cards. 

Fig 1: BBDXY Weekly Chart

Source: MNI - Market News/Bloomberg Finance L.P