The NZD/USD exchange rate moved sideways after the latest New Zealand consumer inflation numbers. The pair was trading at 0.6100 on Wednesday morning as traders reflected on that report and its impact on the next actions by the RBNZ.
New Zealand inflation reportThe NZD/USD exchange rate has been in a downward trend after peaking at 0.6368 in December. This retreat happened as investors turned to the US dollar because of the strength of the American economy. Most analysts and economists have already ruled out a Fed rate cut in March because of the strong inflation numbers.
Meanwhile, in New Zealand, the country’s statistics agency revealed that the Consumer Price Index (CPI) retreated to 4.7% in the fourth quarter. That was an encouraging figure since it peaked at 7.3% after the Covid-19 pandemic. It has also grown at a slower pace in the past four straight quarters and that it reached its lowest point since 2021.
New Zealand’s inflation still remains much higher than the central bank’s target of 2.0%. Therefore, there is a likelihood that the bank will maintain a hawkish tone in the coming months. In its recent meeting in November, the bank decided to leave rates unchanged at 5.50% and warned that another rate was coming.
However, with the economy slowing, the bank will opt to hold rates higher for longer instead of hiking. This view was supported by an analyst at ANZ, who said:
“That said, we remain concerned about sticky domestic driven inflation risks. The RBNZ is likely to proceed with caution given the potential costs of pivoting too early remain very high.”
Looking ahead, the next important NZD/USD news will be the upcoming flash manufacturing and services PMI numbers from the United States. These numbers will likely show some modest improvements in the two sectors.
Most importantly, the US will publish the latest GDP numbers on Thursday followed by the PCE report on Friday. These metrics will provide more information about the state of the American economy.
NZD/USD technical analysis
The 4H chart shows that the NZD to USD exchange rate has been in a strong bearish trend in the past few weeks. It has dropped from the December high of 0.6365 in December to below 0.6100. The pair has dropped below the 38.2% Fibonacci Retracement level. It has also moved below the 50-period moving average.
The Relative Strength Index (RSI) and the MACD indicators have drifted upwards. Therefore, the outlook for the pair is still bearish, with the next key point to watch being the psychological point at 0.600. This price is along the 38.2% Fibonacci Retracement point.
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