New Zealand employment preview: temporal relief on an upward surprise

• RNZB concerned about future growth and slowing inflationary pressures.
• Wages expected to have picked up modestly in the last quarter of the year.

New Zealand will release early Thursday its Q4 employment data, foreseen slowing from the previous quarter, with jobs' growth in the three months to December seen up by a measly 0.3%, following a 1.1% advance in Q3. The unemployment rate, which dropped from 4.5% to 3.9% in the third quarter of the year, is seen up to 4.1%, despite the participation rate is seen decreasing to 71.0% from 71.1%. The brighter spot and not that bright is wages' growth as the quarterly an yearly figures are expected to have picked up.

These numbers mean little change and therefore, lesser chances of the figures affecting RBNZ's monetary policy decision, scheduled to meet next week, and expected to maintain the status quo, as policymakers are more concerned about growth and inflation. Indeed, the latest inflation release fueled concerns as, in the last quarter of the year, CPI grew by 0.1%, sharply down when compared to a 0.9% gain the previous quarter. The decreasing inflationary pressures were blamed on falling oil prices and cheaper vegetable prices.  The RBNZ has a wide inflation target between 1% and 3%, although policymakers have hinted they will be more comfortable with inflation around 2%. The poor quarterly advance above mentioned, left the annual CPI at 1.9%, close to mid-way the central bank's target, and keeping rate cuts odds high.

Growth, on the other hand, is quite a concern, particularly considering the small economy is being affected by the global economic slowdown. In 2018, GDP held close to 3%, at least at Q3, the latest official release that showed that the country grew by 0.3% in the three months to September. Forecasts, however, see it falling below 2% in the upcoming years.

New Zealand economic reality is better than the ruling fears, but at the end of the day, these last weight more.

NDZ/USD Technical outlook

The employment figures have to be a real upward shock, particularly focused on wages´ growth, to give the Kiwi a lift, now depressed following its Australian counterpart. Daily basis, the current decline seems corrective, as the pair remains well above all of its moving averages, with the 20 SMA heading north below the current level and above the larger ones, providing a dynamic support at 0.6820. Technical indicators have lost upward strength but so far hold within positive ground, limiting chances of a downward move. If the mentioned level gives up, however, the risk of a steeper slide will be larger, with the next probable bearish target at 0.6765. An immediate resistance comes at around 0.6880, where the pair has multiple intraday highs from December/January, with gains beyond it favoring an extension up to 0.6943, this week high.