New Zealand’s jobless rate is likely to remain unchanged at 4.9% in Q1 2021 but all eyes remain on the participation rate for RBNZ’s likely policy action. According to FXStreet’s Dhwani Mehta, any downside surprise could exacerbate the pain in the kiwi, with 0.7100 at risk.

Focus on the participation rate and RBNZ policy action

“The NZ Unemployment Rate is expected to hold steady at 4.9% in Q1 2021 after falling sharply from 5.3% seen in Q3. The Participation Rate is likely to tick a tad higher at 70.3% in the first quarter of 2021 vs. Q4’s 70.2%.”

“If the participation rate doesn’t rise as expected, it would be reflective of higher unemployment in the economy. Meanwhile, a higher participation rate and strong job growth could eventually drive up wage inflation over the coming quarters.”

“Any downside surprise to the employment indicators could fan expectations of additional easing by the RBNZ, which could exacerbate the pain in the kiwi.”

“The Relative Strength Index (RSI) remains bearish, suggesting more room to the downside should the data disappoint. The critical 200-SMA at 0.7101 could be put at risk, opening floors towards 0.7050 psychological level.”

“A rebound towards the 100-DMA support now resistance at 0.7173 cannot be ruled out on a positive surprise, with 0.7200 as the next upside target.”

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