NZD/USD Plunges Ahead of US Inflation Data

The Kiwi fell broadly against the greenback on Wednesday, taking the price to less than 0.7720 ahead of the US inflation and New Zealand’s GDP figures. Started from September 26th, the pair is still consolidating between 0.7660 and 0.7975.

Technical Analysis

After surging to more than 0.7840, today the New Zealand Dollar took a deep plunge thereby losing the yesterday’s gains. As of this writing, the pair is being traded around 0.7725. The pair opened the Asian session at 0.7792. Being restricted by the barrier around 0.7800, the pair could only hit 0.7801 and was pulled down.

On the downside, a support can be seen around 0.7710. Success in testing this support will make the pair move towards 0.7655 handle. The next support then can be seen around 0.7608, the yearly low and swing low of December 9.  Success in breaking this level will allow the pair to carve fresh yearly low.

nzdusd

On the upside, an immediate resistance can be noted around 0.7830, the psychological number and confluence of trend line and 50-Day SMA, as demonstrated in the above chart. 0.7975, the 38.2% fib level, is the ultimate major resistance that the pair may have to face in near future.

The long-term bias is bearish because of lower highs and lower lows on the daily chart. The bias will remain bearish as far as the 0.8500 zone is intact.

US Inflation

The Consumer Price Index (CPI)—a main gauge for inflation—remained 1.4% in November as compared to 1.7% in the same month of the year before, the median projection of different economists says. Generally speaking, higher inflation is considered positive for the US economy thus a better than expected actual reading will be seen as bullish for USDCHF and vice versa. Not to mention, the focus of the US monetary policy has been shifted to the inflation figure since the labor market has performed better than expectations lately.

FED Interest Rate Decision

The Federal Reserve Bank is scheduled to announce the interest rate today in the US session. Hawkish sentiment in the monetary policy statement will be seen as bearish for NZDUSD and vice versa. Investors are expecting FED to be optimistic about the rate hike.

New Zealand Gross Domestic Product (Q3)

The gross domestic product of New Zealand for the third quarter of the year remains at 3.3% below than 3.9% of the same quarter in the year before. Taken as a measure of economic activity, a high reading is considered positive for kiwi and vice versa. Thus a better than expected figure may spur buying pressure in the price of NZD/USD.

Trade Idea

Considering the overall fundamental and technical analysis, buying the pair on a daily closing above the trendline resistance could be a good strategy in short to medium term

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Usman Ahmed

Usman Ahmed is an individual forex trader and market analyst. He holds a Masters of Business Administration (MBA) degree. His work includes fundamental and technical reports on various currency pairs, commodity futures and stock markets. His technical analysis features price action strategies.

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