The pound was the main gainer after the UK unemployment rate for April fell to 6.6% from 6.8% in March, the lowest since early 2009. The market forecast was for the rate to decline to 6.7%. Average weekly earnings, which are crucial for the BoE’s assessment of the slack in the labor market, slowed more than anticipated. BoE officials have pledged to keep the Bank’s benchmark rate at a record low until slack in the labor market is used up. Policy makers are divided on the amount of capacity remaining, with some suggesting that the first increase in rates may be approaching. GBP/USD rallied on the more-than-expected decline in the unemployment rate reaching an intraday high of 1.6797.
The New Zealand dollar was the second in-line winner, ahead of the RBNZ’s rate decision on Thursday. The majority of economists expects the Central Bank to increase its official cash rates by another 25bps to 3.25%. While the Bank is broadly expected to raise rates, the statement will be closely watched for any clues about the future course of the rates.
NZD/USD moved higher during the European morning Wednesday, breaking above the 0.8545 barrier, which coincides with the 200-period moving average. This move also signals the completion of a possible complex inverted head and shoulders formation. The rate is now heading towards the 0.8590 (R1) resistance, where a clear break could trigger extensions towards the next hurdle at 0.8650 (R2). As long as the rate is printing higher highs and higher lows within the purple uptrend channel, I see a positive short-term picture. On the daily chart, the pair is trading above both the 50- and 200-day moving averages, while the daily MACD crossed above its signal line, favoring the continuation of the advance.
Support: 0.8545 (S1), 0.8480 (S2), 0.8400 (S3)
Resistance: 0.8590 (R1), 0.8650 (R2), 0.8700 (R3)