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'Economic projections suggest New Zealand is poised for faster growth in coming years, a narrative that plays into the hands of a dynamic local workforce.' - Sam Bourgi, Economic Calendar

The New Zealand unemployment rate fell unexpectedly, official figures revealed on Tuesday. In the March quarter, the seasonally adjusted jobless rate dropped to 4.9%, while analysts expected only a minor change from 5.2% to 5.1%. The plunge was mainly associated with the fewer men being unemployed. Namely, the number of jobless males slipped to 4.2%, which is the lowest level since the December 2008 quarter. In the meantime, the employment rate soared 1.2% and also exceeded experts' evaluations, who anticipated only a slight increase from 0.7% to 0.8%. The released report showed that growth in employment outpaced growth in the working-age population for the six-consecutive quarter and, thus, added 0.3% to spike in the employment rate. Another data released on Tuesday revealed that the GDT Price Index in the ninth auction in 2017 climbed 3.6%, following an increase of 3.1% in the previous auction. This data marked the fourth successive gain in a row even though prices remained below the Q4 2016 levels. Nevertheless, many experts believe that in the short-term New Zealand's dairy products exports will increase amid surging demand from China. Overall, it is quite unusual for dairy prices to surge at this time of the year.

Today, all eyes will be turned to the FOMC rate decision. The forecast is for the Committee to keep borrowing costs unchanged, something supported by market pricing, which indicates a 95% probability for no action. Bearing also that this meeting does not include updated forecasts or a press conference, market action will most likely come from the language of the statement accompanying the decision.

Recent comments from various Fed officials are in line with the 'dot plot', which points to another two hikes this year. However, these were before the nation’s core inflation data for March revealed a slowdown. From a growth perspective, economic activity slowed markedly in Q1, but according to the March minutes, the Committee views some of this softness as transitory. On the bright side, the labor market appears quite robust overall.

Bearing these mixed data in mind, we expect the Fed to maintain a more or less balanced tone, with risks tilted towards a slightly more cautious narrative than previously. Before clearly communicating that further near-term normalization is on the cards, policymakers may prefer to wait for a rebound in the data and even some clarity surrounding fiscal policy. In case the Fed disappoints investors looking for strong hints regarding a June hike, USD could come under selling interest.

USD/JPY has been trending higher since the 18th of April, but the trend shows signs of weakening momentum recently. Now, the rate is trading between the support of 111.90 (S1) and the resistance of 112.35 (R1), and we expect it to continue trading near that range heading into the FOMC decision. In case the Fed adopts a more cautious stance than previously, the pair may slide below 111.90 (S1), initially aiming for the next support of 111.40 (S2). Switching to the daily chart, we see that the pair continues to trade within the downside channel that has been containing the price action since the start of the year.

The proximity to the upper bound of that channel combined with the slowdown of the latest recovery, amplify the case for the pair to turn down again soon.

NZD spikes higher on strong employment data

Overnight, the Kiwi dollar came under buying interest following the release of the nation’s employment data for Q1. The report was quite strong, with the unemployment rate unexpectedly dropping and the labor force participation rate rising. These suggest that the labor market continues to tighten at a rapid pace. Coming on top of the solid inflation figures for the same quarter, we think that these data enhance the case for the RBNZ to appear less dovish than previously when it meets next week.

NZD/USD edged up on the employment data, breaking above the resistance (now turned into support) of 0.6940 (S1). The latest recovery started from near 0.6880 (S3), which happens to be the lower bound of the longer-term sideways range between that zone and the 0.7400 territory. Therefore, there is the possibility for the pair to continue trading higher for a while, at least heading into next week’s RBNZ gathering. We expect the bulls to challenge the 0.6980 (R1) resistance soon, where a clear break is possible to target the 0.7020 (R2) hurdle and the downside resistance line drawn from the peak of the 21st of March.

As for the rest of today’s highlights:

During the European day, the UK construction PMI for April is expected to have declined somewhat. However, following the unexpected surge in the manufacturing index for the month, we see the risks surrounding that forecast as skewed to the upside. In case of a positive surprise, GBP could come under renewed buying interest.

From Eurozone, we get the flash preliminary estimate of GDP for Q1. We also get the bloc’s PPI for March, as well as Germany’s unemployment rate for April.

As for the US data, we get the ADP employment report for April and the ISM non-manufacturing PMI for April. The ADP figure is expected at 190k, a solid number, while the ISM index is expected to have risen. Even though USD could gain on these data, its direction over the next couple of days may be primarily decided by the FOMC signals.

USD/JPY

Support: 111.90 (S1), 111.40 (S2), 111.00 (S3)

Resistance: 112.35 (R1), 112.90 (R2), 113.50 (R3)

NZD/USD

Support: 0.6940 (S1), 0.6900 (S2), 0.6880 (S3)

Resistance: 0.6980 (R1), 0.7020 (R2), 0.7050 (R3)

EURUSD

The EURUSD had a moderate bullish momentum yesterday topped at 1.0933 and hit 1.0936 earlier today in Asian session but still trapped inside the range area as you can see on my H1 chart below. The bias is bullish in nearest term testing 1.0950. A clear break above that area could trigger further bullish pressure testing 1.1100 – 1.1050 area. Immediate support is seen around 1.0900. A clear break below that area could lead price to neutral zone in nearest term testing 1.0850 key support which need to be broken to the downside for a revisit to pre-gap level at 1.0730. Overall I remain neutral.

GBPUSD

The GBPUSD regained its bullish momentum yesterday topped at 1.2939 and hit 1.2946 earlier today in Asian session. The bias is bullish in nearest term testing 1.2965. A clear break above that area could trigger further bullish pressure testing 1.3000 – 1.3050 area as a part of the double bottom bullish scenario on daily chart. From an H1 chart perspective as you can see on my H1 chart below, price is consistently moving above the EMA 200 suggests a valid bullish trend. Immediate support is seen around 1.2910. A clear break below that area could lead price to neutral zone in nearest term testing 1.2865 but only a clear break back below 1.2780/50 would interrupt the double bottom bullish scenario.

USDJPY

The USDJPY attempted to push higher yesterday topped at 112.30 but closed a little bit lower at 112.00. The bias remains bullish in nearest term but we need a consistent move above 112.20 to continue the bullish scenario testing 112.90 region as a part of the bullish phase after broke above the trend line resistance as you can see on my H1 chart below. Immediate support is seen around 111.75. A clear break below that area could lead price to neutral zone in nearest term testing 111.45 – 110.85 support area which is a good place to buy.

USDCHF

The USDCHF had a bearish momentum yesterday bottomed at 0.9912 and hit 0.9908 earlier today in Asian session. The bias is bearish in nearest term testing 0.9880 – 0.9813 area. Immediate resistance is seen around 0.9935. A clear break above that area could lead price to neutral zone in nearest term testing 0.9960 but key resistance remains at 1.0020 area which is a good place to sell with a tight stop loss. Overall I remain neutral.

Triangles are five wave patterns in a contracting shape that occurs in the middle of an uptrend. Well, this is exactly what we see on EURUSD hourly chart, so price structure suggests that a new push higher is coming. There is room for 1.1000 area to be hit this week where in fact upside could be limited. Why? Because we know that 'triangles occur prior to the final move within a larger structure', so any new leg up should then be final piece within a larger uptrend; blue wave five in our case. From an invalidation point of view, pattern will have to be changed if wave a) support will be broken.

EURUSD, 1H

The pair remains steady and returns above 112.00 handle after Tuesday's rally showed hesitation at the base of thickening daily cloud (spanned between 112.30 and 112.85).

Bullish daily technicals are supportive for further advance, with bullish signals to be generated on close above cracked 112.14 barrier (Fibo 38.2% of 118.65/108.11 descend) and penetration into daily cloud.

Lift above the cloud would look for test of 100SMA at 113.28 and 50% retracement of 118.65/108.11 at 108.11).

Correction low at 111.93 and rising hourly cloud (spanned between 111.89 and 111.70), mark initial supports which are expected to ideally contain dips and reduce risk of deeper pullback.

Res: 112.30, 112.67, 112.85, 113.28
Sup: 111.90, 111.70, 111.47, 111.19

Cable is holding between strong supports at 1.2859/67 zone (rising 10SMA / Tue's low / daily Tenkan-sen) and recovery highs at 1.2938/45 in early Wednesday, after being unable to extend Tuesday's data-driven rally towards key barrier at 1.2963 (28 Apr high).

Overall bullish structure is underpinned by multiple Golden-crosses (10, 20, 30 / 200SMA's) but reversal of slow stochastic from overbought zone, which generated negative signal, balances.

Studies on lower timeframes also give mixed signals, as hourly cloud (1.2919/1.2894) has been dented on probes below cloud base, while ascending thick 4-hr cloud (1.2847/1.2714) continues to underpin.

Bulls are expected to remain in play for final probe above 1.2963 pivot and attack at psychological 1.3000 barrier while consolidation is held by strong 1.2860 support zone.

Otherwise, increased risk for deeper pullback could be expected on sustained break lower.

Res: 1.2945, 1.2963, 1.3000, 1.3055
Sup: 1.2883, 1.2859, 1.2821, 1.2770

The Euro is holding in the upper side of seven-day 1.0850/1.0950 congestion in early Wednesday, following Tuesday's bullish close. Bullish near-term technicals keep focus at the upside, as multiple bullish crosses of daily MA's (the latest were 10/200 and 20/30) and north-heading 10SMA/thick 4-hr cloud (1.0858/1.0775) continue to underpin.

Eventual break above 1.0950 trigger would open psychological 1.1000 barrier (also 50% of larger 1.1614/1.0339 descend) and Fibo 138.2% projection at 1.1033.

Lows of Mon/Tue at 1.0885 offer initial support, followed by rising 10SMA (currently at 1.0864) and range floor at 1.0850, loss of which would weaken near-term structure and risk test of next pivots at 1.0832 (200SMA) and 1.0804 (Fibo 38.2% of 1.0568/1.0950 upleg). Markets are awaiting the Fed's policy statement, due later today, for more clues about interest rate outlook which would give stronger direction signals for the pair..

Res: 1.0950, 1.1000, 1.1033, 1.1067
Sup: 1.0914, 1.0885, 1.0864, 1.0850

EUR/USD

Current level - 10917

Nothing interesting here, as any upward attempt is still capped at 1.0950 and only a violation of the latter will challenge 1.1010 area. Key support lies at 1.0826.

Profit-taking affects gold curbing silver and platinum

USD/JPY

Current level - 112.12

The overall bias remains positive, for a break through 112.26 resistance, towards 112.90 dynamic hurdle. Crucial on the downside is 111.40 low.

GBP/USD

Current level - 1.2898

Yesterday's failure at 1.2860 support led to a massive rebound all the way up to 1.2945 and the pair is currently getting ready for another test of the mentioned static area. Only a violation of the latter will expose 1.2770.

Daily Pivots: (S1) 0.7479; (P) 0.7509; (R1) 0.7555; More...

AUD/USD is staying in range of 0.7439/7609 and intraday bias remains neutral for the moment. We're favoring the case that rise from 0.7158 has completed at 0.7748 already. And deeper decline is expected. Break of 0.7439 will turn bias to the downside and target a test on 0.7144/7158 support zone. At this point, there is no clear sign of larger down trend resumption yet. Hence we'll be cautious on strong support from 0.7144/58 to contain downside and bring rebound. On the upside, break of 0.7609 will argue that the fall from 0.7748 has completed. In such case, bias will be turned back to the upside for 0.7748 resistance.

In the bigger picture, we're still treating price actions from 0.6826 low as a correction pattern. And, as long as 38.2% retracement of 0.9504 to 0.6826 at 0.7849 holds, long term down trend from 1.1079 is expected to resume sooner or later. Break of 0.6826 low will target 0.6008 key support level. However, firm break of 0.7849 will indicate that rise from 0.6826 is developing into a medium term rebound, rather than a sideway pattern. In such case, stronger rise should be seen to 55 month EMA (now at 0.8118) and above.

Daily Pivots: (S1) 1.3652; (P) 1.3704; (R1) 1.3760; More....

USD/CAD's rally continues and reaches as high as 1.3757 so far. Intraday bias remains on the upside for the moment. Current rally is part of the larger rise from 1.2460 and should target next medium term fibonacci level at 1.3838 ahead. We'd be cautious on topping there. On the downside, below 1.3649 minor support will turn bias neutral and bring retreat first.

In the bigger picture, price actions from 1.4689 medium term top are seen as a correction pattern. The first leg has completed at 1.2460. The second leg from 1.2460 is likely still in progress and could target 61.8% retracement of 1.4689 to 1.2460 at 1.3838. We'd look for reversal signal there to start the third leg. However, break of 1.3222 support will argue that the third leg has already started and should at least bring a retest of 1.2460 low. Meanwhile, sustained trading above 1.3838 would pave the way to retest 1.4689 high.