Open trading account 
Entered couple of orders last night on expectations of strengthening of NZD during New Zealand employment data news event, as expectations were high of a better employment numbers and decline in unemployment rate. Moreover, from technical point of view NZDUSD was at Daily demand zone, so entered long at 0.8450 and short on EURNZD at 1.5847 due to ongoing weakness of Euro against other major currencies.
However, there was no follow thru on NZDUSD due to disappointing labor market report. While the unemployment rate dropped to 5.6% from 5.9%, employment rose by a mere 0.4% in the second quarter versus 0.9% in the first quarter. The participation rate also dropped to 68.9% from 69.2% and average hourly earnings growth slowed to 0.5% from 0.7%. This means the main reason for the improvement in the unemployment rate was due to drop in participation, which the Reserve Bank will not see as a positive shift in New Zealand’s economy.
Moreover, there was another bad news at Global Daily Trade auction. As Prices dropped 8.4%, which adds to the 8.9% decline at the last auction. Since February, prices are down 41%, which is disastrous for terms of trade because dairy accounts for approximately a third of New Zealand’s exports by value. According to analysts there’s a good chance Fonterra will lower its payout further this year and all of this has a direct impact on the terms of trade, GDP growth and the Reserve Bank’s pace of tightening.
Between the drop in dairy prices and softer labor market conditions, analysts are almost certain that the RBNZ will leave rates unchanged for the rest of the year. Hence there was hardly any bullish follow thru on NZDUSD until New York open and as such I decided to cut off trade with -5 pips loss. However, EURNZD did offered some profit and as such closed that trade for +55 pips profit and 15K increase in overall equity.
However, there was no follow thru on NZDUSD due to disappointing labor market report. While the unemployment rate dropped to 5.6% from 5.9%, employment rose by a mere 0.4% in the second quarter versus 0.9% in the first quarter. The participation rate also dropped to 68.9% from 69.2% and average hourly earnings growth slowed to 0.5% from 0.7%. This means the main reason for the improvement in the unemployment rate was due to drop in participation, which the Reserve Bank will not see as a positive shift in New Zealand’s economy.
Moreover, there was another bad news at Global Daily Trade auction. As Prices dropped 8.4%, which adds to the 8.9% decline at the last auction. Since February, prices are down 41%, which is disastrous for terms of trade because dairy accounts for approximately a third of New Zealand’s exports by value. According to analysts there’s a good chance Fonterra will lower its payout further this year and all of this has a direct impact on the terms of trade, GDP growth and the Reserve Bank’s pace of tightening.
Between the drop in dairy prices and softer labor market conditions, analysts are almost certain that the RBNZ will leave rates unchanged for the rest of the year. Hence there was hardly any bullish follow thru on NZDUSD until New York open and as such I decided to cut off trade with -5 pips loss. However, EURNZD did offered some profit and as such closed that trade for +55 pips profit and 15K increase in overall equity.
