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NZD/USD Rate Eyes July-Low Ahead of New Zealand Inflation Report

NZD/USD Rate Eyes July-Low Ahead of New Zealand Inflation Report

David Song,
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New Zealand Dollar Talking Points

NZD/USD gives back the rebound from the monthly-low (0.6688) as the threat of a trade war dampens the outlook for the Asia/Pacific region, but fresh developments coming out of the New Zealand economy may shore up the kiwi-dollar exchange rate as the headline reading for inflation is expected to pick up in the second-quarter of 2018.

Image of daily change for major currencies

NZD/USD Rate Eyes July-Low Ahead of New Zealand Inflation Report

Image of daily change for NZDUSD

Updates to New Zealand’s Consumer Price Index (CPI) is anticipated to show the gauge increasing 1.6% per annum versus the 1.1% print for the first three-months of 2018, and signs of stronger price growth may heighten the appeal of the New Zealand dollar as it puts pressure on the Reserve Bank of New Zealand (RBNZ) to lift the official cash rate (OCR) off of the record-low.

Image of Reserve Bank of New Zealand calendar

However, a batch of lackluster data prints may encourage the RBNZ to buy more time as ‘consumer price inflation remains below the 2 percent mid-point of our target,’ and Governor Adrian Orr & Co. may stick to the current script at the next meeting on August 9 as officials note that ‘the best contribution we can make to maximising sustainable employment, and maintaining low and stable inflation, is to ensure the OCR is at an expansionary level for a considerable period.’

With that said, the deviating paths for monetary policy instills a outlook for NZD/USD especially as the Federal Open Market Committee (FOMC) appears to be on course to deliver four rate-hikes in 2018, and the exchange rate may continue to track the bearish trend from earlier this year as the Relative Strength Index (RSI) highlights a similar dynamic. Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups!

NZD/USD Daily Chart

Image of NZDUSD daily chart
  • The recent rebound in NZD/USD appears to have stalled at the former-support zone coming in around 0.6820 (23.6% retracement) to 0.6870 (78.6% expansion), with the pair at risk of making a run at the monthly-low (0.6688) as both price & RSI respond to trendline resistance.
  • Need a closing price below the 0.6710 (61.8% expansion) to 0.6720 (61.8% expansion) region to open up the downside targets, with the next area of interest coming in around 0.6600 (23.6% retracement) to 0.6630 (78.6% expansion).
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--- Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.

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