NZD/USD Forex Technical Analysis – Position-Squaring Ahead of US CPI Report Continues

The New Zealand Dollar is moving higher early Monday as speculators continue to crawl up from last week’s steep plunge. Although the Reserve Bank (RBNZ) vowed to continue to raise rates aggressively, the current rally is likely being fueled by short-covering and position-squaring ahead of Tuesday’s U.S. consumer inflation report and not fresh buying.

At 02:13 GMT, the NZD/USD is trading .6115, up 0.0010 or +0.16%.

RBNZ Remains Hawkish

The RBNZ last month delivered its seventh straight hike – and fourth consecutive rise of 50 basis points (bps) – to lift rates to 3%, the highest since September 2015.

The RBNZ also struck a more hawkish tone. It now sees rates at 4% by early 2023, versus a previous projection of 3.7%, implying at least one more 50 bps rate hike at upcoming meetings.

US CPI Report on Tap; Numbers Won’t Rattle Fed

Unlike last month’s July CPI report, Tuesday’s numbers aren’t expected to rattle the markets or the Fed because recent comments from Fed officials indicate policymakers won’t back down on planned rate increases.

Economists polled by Reuters forecast that the U.S. consumer price index (CPI) fell 0.1 percent month-on-month in August, after remaining flat in July. They expect a year-on-year reading of 8.1 percent for August, down from 8.5 percent a month earlier.

Core inflation, which excludes energy and food prices, is forecast to have edged up 0.4 percent month-on-month in August, following a reading of 0.3 percent in July.

Fed Chair Powell said late last week, “We need to act now, forthrightly, strongly as we have been doing, and we need to keep at it until the job is done. The Fed has and accepts responsibility for price stability.”

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum has been trending higher since the confirmation of the September 7 closing price reversal bottom.

A trade through .5996 will negate the chart pattern and signal the resumption of the downtrend. A move through .6251 will change the main trend to up.

The minor range is .5996 to .6153. Its 50% level at .6074 is potential support.

The short-term range is .6251 to .5996. Its retracement zone at .6123 to .6154 is potential resistance. It stopped the buying at .6153 on Friday.

The major resistance and upside target is the long-term Fibonacci level at .6232.

Daily Swing Chart Technical Forecast

Trader reaction to the short-term 50% level at .6123 is likely to determine the direction of the NZD/USD on Monday.

Bullish Scenario

A sustained move over .6124 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into the resistance cluster at .6153 – .6154. The latter is a potential trigger point for an acceleration to the upside with the next target .6232.

Bearish Scenario

A sustained move under .6123 will signal the presence of sellers. If this generates enough downside momentum then look for a plunge into the minor pivot at .6074. This is a potential trigger point for an acceleration to the downside with .5996 the next key target.