NZD/USD Forecast As New Zealand Inflation Beats Estimates
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- The NZD/USD pair has pulled back in the past few days.
- New Zealand published stronger-than-expected inflation numbers.
- The US has released a series of weak economic data.
The NZD/USD exchange rate retreated to the lowest level since July 12 as investors reacted to the latest New Zealand inflation data. The pair retreated to a low of $0.6262, which was substantially lower than last week’s high of 0.6412.
New Zealand inflation numbers
Consumer inflation in New Zealand remained at an elevated level in the second quarter meaning that the RBNZ has more work to do. Data by the statistics agency showed that the headline consumer price index dropped from 1.2% in Q1 to 1.1% in the second quarter. While this decline was welcome, it was higher than the median estimate of 1.0%.
New Zealand’s inflation fell on an annual basis as well. It fell from 6.7% in Q1 to 6.0% in Q2, higher than the median estimate of 5.9%. These numbers mean that the country’s inflation is falling at a slower pace than initially expected.
Therefore, there is a likelihood that the Reserve Bank of New Zealand (RBNZ) will need to do more to fight inflation. The bank decided to leave interest rates unchanged at 5.5% last week. In the accompanying statement, Governor Adrian Orr hinted that inflation would remain at this level until Q3’24. The RBNZ will meet again on August 16.
The NZD/USD pair has reacted to a series of weak economic numbers from the US. As we wrote here, the headline American inflation dropped to 3.0% in June. Core inflation fell to 4.8%. A few days before that, data revealed that the country’s labor market softened in June.
And on Tuesday, forex news revealed that the country’s retail sales, industrial production, and manufacturing output fell in June. Despite all these, analysts expect that the Fed will hike interest rates by 0.25% next week.
NZD/USD technical analysis
(Click on image to enlarge)
The four-hour chart shows that the NZD to USD price has drifted downwards in the past few days. This retreat started after the pair rose to a high of 0.6410 on Friday. That was an important price since it was the highest point in May.
Now, the pair has dropped below the 25-period and 50-period moving averages while the Relative Strength Index (RSI) has pointed downwards. Therefore, I suspect that 0.6246 (June 16 high) will provide support for the pair. As such, there is a likelihood that it will resume the bullish trend on Wednesday. A drop below the support at 0.6246 will invalidate the bullish view.
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