- NZD/USD rebounded from year lows and retraced the 0.5600 mark in a volatile trading session.
- The US Producer Price Index for September remained elevated as traders brace for tomorrow’s US CPI.
- NZD/USD Price Forecast: Subject to a mean reversion move as prices were heavily overextended so a test of 0.5700 is on the cards.
The NZD/USD recovers some ground, extending its gains to two consecutive days, amid fragile sentiment, with US stocks swinging between gains and losses. US economic data shows inflation remains high, putting pressure on the Fed, while calls from central banks around the world for further tightening weighed on riskier assets. At the time of writing, the NZD/USD is trading at 0.5601, up 0.30% from its opening price.
NZD/USD recovers some ground despite mixed sentiment
On Wednesday, the US Department of Labor reported that prices paid by producers in September increased, exceeding estimates, justifying the need to raise interest rates. The headline PPI figure outlined prices rising at an 8.5% annual pace, while the core PPI, which strips out volatiles, rose 7.2% year-on-year, but below forecasts and the 7.3% figure. of August.
US central bank policy makers reiterated that the Fed must keep raising rates. Minnesota Fed President Neil Kashkari crossed the wires on Wednesday. He stated that there is “tremendous uncertainty about the fundamentals of the US economy”, while he commented that raising rates aggressively would allow the economy to be evaluated. Kashkari added that he expects rates to peak at around 4.50%.
On the New Zealand side, the Reserve Bank of New Zealand needs to keep pace with its tightening cycle as inflationary pressures remain. Westpac analysts said they expect the RBNZ to raise the Official Cash Rate (OCR) to 4.5%, with increases of 50 basis points at the November and February meetings.
NZD/USD Price Forecast
From a daily chart point of view, NZD/USD continues to have a neutral bias to the downside. However, the overextension of the downtrend for a long period and the Relative Strength Index (RSI) exit from oversold conditions could pave the way for a mean reversal move. Therefore, a move towards the 20-day EMA at 0.5737 is on the cards. On the other hand, a drop below the year low at 0.5534 would open the door to 0.5500.
Source: Fx Street
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