- The NZD/USD bounces towards the grouped resistance as the New Zealand IPC is approaching.
- New Zealand inflation is expected to mark the tone for the cautious RBNZ, while the moderate Fed Waller increases the expectations of a rate cut in September.
- The NZD/USD approaches the resistance of the mobile average, with the action of the price vulnerable to the next CPI.
The New Zealand dollar (NZD) is strengthening against the US dollar (USD) on Friday, since investors reposition their expectations on US interest rates and look at the next New Zealand inflation data.
At the time of writing, the NZD/USD is quoted about 0.5960 with intra -setting of 0.50%.
New Zealand inflation is expected
Sunday night (22:45 GMT) New Zealand statistics You will publish the consumer price index (CPI) data for the second quarter. The expectations for the iPC of the second quarter are 0.6%intertrimestral, compared to 0.9%, with the annual estimate for the second quarter in 2.8%, which would reflect an increase with respect to the previous reading of 2.5%.
Since New Zealand inflation data is a key input in the policy decisions of the New Zealand Reserve Bank (RBNZ), any surprise on the rise could revive the expectations that the RBNZ maintain the rates in the current level of 3.25% for a longer time.
The appointments of the Julio RBNZ meeting published in the media report showed that the members of the Board remained cautious, stating that, “the economic perspectives remain highly uncertain. Additional data on the speed of the economic recovery of New Zealand, the persistence of inflation and the impacts of the tariffs will influence the future path of the official cash rate.”
In the largest currency markets, the US dollar weakened on Friday after the governor of the Federal Reserve (Fed), Christopher Waller, continued advocating that the Fed cuts rates at the July meeting if inflation continues to decrease. Its moderate inclination caused a reevaluation of the Fed expectations and increased the probability of a rate cut in September, with another cut expected for later in the year.
This caused a setback in the USD, providing a short -term relief for risk -sensitive currencies such as NZD. However, with the appetite for the widest risk still fragile and key data ahead, the operators will probably monitor both the feeling of the USD and the technical levels in search of directional clues.
The NZD/USD approaches the resistance of the mobile average, with the action of the price vulnerable to the next CPI.
In the daily chart, the NZD/USD has bounced from a key support area near June of 0.5883 and the simple mobile average (SMA) of 100 days in 0.5897, establishing a temporary floor after the recent mass sale.
The torque has recovered the level of fibonacci recoil from 38.2% of the May minimum movement to the maximum of July in 0.5951, with a daily candle that reflects a renewed buyer interest.
However, the recovery now faces a significant resistance above, including the 50% decline in 0.5984, the 50 -day SMA in 0.5994, and the Fibonacci level of 61.8% of 0.6016, in close proximity to the 20 -day SMA in 0.6018.
This has created a dense technical barrier that will probably limit profits unless it is driven by a fundamental catalyst as stronger IPC data than expected or a continuous weakness of the US dollar.
NZD/USD DIARY GRAPH
The relative force index (RSI) is 45, recovering from overall but still neutral conditions, supporting the idea of a short -term rebound without confirming a complete reversal of the trend.
A rupture above 0.5985–0.6017 would invalidate the recent bearish structure and expose the 78.6% decline in 0.60621, with margin for a movement towards the maximum of July about 0.61210. Down, the inability to stay above 0.5951 could see the bearish impulse resume, aiming at 0.5910 and at least June at 0.5883, especially if New Zealand inflation data disappoint or the US dollar recovers strength after the comments of the Fed.
Inflation – Frequently Questions
Inflation measures the rise in prices of a representative basket of goods and services. General inflation is often expressed as an intermennsual and interannual percentage variation. The underlying inflation excludes more volatile elements, such as food and fuel, which can fluctuate due to geopolitical and seasonal factors. The underlying inflation is the figure on which economists focus and is the objective level of central banks, which have the mandate of maintaining inflation at a manageable level, usually around 2%.
The consumer price index (CPI) measures the variation in the prices of a basket of goods and services over a period of time. It is usually expressed as an intermennsual and interannual variation. The underlying IPC is the objective of the central banks, since it excludes the volatility of food and fuels. When the underlying IPC exceeds 2%, interest rates usually rise, and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually translates into a stronger currency. The opposite occurs when inflation falls.
Although it may seem contrary to intuition, high inflation in a country highlights the value of its currency and vice versa in the case of lower inflation. This is because the Central Bank will normally raise interest rates to combat the greatest inflation, which attracts more world capital tickets of investors looking for a lucrative place to park their money.
Formerly, gold was the asset that investors resorted to high inflation because it preserved their value, and although investors often continue to buy gold due to their refuge properties in times of extreme agitation in the markets, this is not the case most of the time. This is because when inflation is high, central banks upload interest rates to combat it. Higher interest rates are negative for gold because they increase the opportunity cost to keep gold in front of an asset that earns interest or place money in a cash deposit account. On the contrary, lower inflation tends to be positive for gold, since it reduces interest rates, making bright metal a more viable investment alternative.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
