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Subdued New Zealand Consumer Price Index (CPI) to Tame NZD/USD Rally

Subdued New Zealand Consumer Price Index (CPI) to Tame NZD/USD Rally

David Song, Strategist

- New Zealand 4Q Consumer Price Index (CPI) to Hold Steady at Annualized 1.9%.

- Will Incoming RBNZ Governor Adrian Orr Endorse a Wait-and-See Approach for Monetary Policy?

Trading the News: New Zealand Consumer Price Index (CPI)

New Zealand CPI

New Zealand’s Consumer Price Index (CPI) is expected to hold steady at an annualized 1.9% during the last three-months of 2017, and signs of subdued price pressures may undermine the recent appreciation in NZD/USD as it encourages the Reserve Bank of New Zealand (RBNZ) to keep the cash rate at the record-low.

A batch of lackluster data prints may spark a bearish reaction in the New Zealand dollar as it encourages the RBNZ to endorse a wait-and-see approach for monetary policy, and incoming GovernorAdrian Orr may keep the central bank on the sidelines throughout the first-half of 2018 as ‘underlying inflation remains subdued.’

Nevertheless, another above-forecast CPI print may fuel the near-term advance in the kiwi-dollar exchange rate as it puts pressure on the RBNZ to start normalizing monetary policy. For additional resources, download and review the FREE DailyFX Advanced Guide for Trading the News to learn our 8 step strategy.

Impact that New Zealand’s CPI print has had on NZD/USD during the previous release

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

3Q

2017

10/16/2017 21:45:00 GMT

1.8%

1.9%

+8

-8

3Q 2017 New Zealand Consumer Price Index (CPI)

NZD/USD 15-Minute Chart

NZD/USD 5-Minute Chart

New Zealand’s Consumer Price Index (CPI) climbed to an annualized 1.9% from 1.7% in the second-quarter of 2017, with the cost of both tradables and non-tradables goods picking up during the three-months through September. The rebound in the headline reading for inflation may encourage the Reserve Bank of New Zealand (RBNZ) to drop its dovish outlook for monetary policy, but it seems as though acting Governor Grant Spencer is in no rush to lift cash rate off of the record-low as ‘headline inflation is likely to decline in coming quarters, reflecting volatility in tradables inflation.

The bullish reaction in NZD/USD was short-lived, with NZD/USD consolidating throughout the day as the pair closed at 0.7171. New to trading? Review the ‘Traits of a Successful Trader’ series on how to effectively use leverage along with other best practices that any trader can follow.

NZD/USD Daily Chart

NZD/USD Daily Chart
  • Topside targets remain on the radar for NZD/USD as the Relative Strength Index (RSI) holds above 70, with the pair at risk of making a run at the 2017-high (0.7558) as the momentum indicator appears to be pushing deeper into overbought territory.
  • A close above the 0.7330 (38.2% retracement) to 0.7380 (23.6% retracement) region opens up the Fibonacci overlap around 0.7520 (50% retracement) to 0.7530 (78.6% retracement), with the next region of interest coming in around 0.7680 (23.6% retracement).

Want more insight with all the major events on tap this week? Join DailyFX Currency Analyst David Song LIVE for an opportunity to cover key market themes along with potential trade setups!

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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