NZD/USD Forex Technical Analysis – Hot US Inflation Reading Likely to Encourage Profit-Taking

The New Zealand Dollar is under pressure for a second session on Thursday as traders weigh expectations of a 75-basis point rate hike by the Reserve Bank (RBNZ) later this month against the possibly of a hot U.S. consumer inflation report driving up the odds of a supersized Fed rate hike in December.

At 05:23 GMT, the NZD/USD is trading .5872, down 0.0013 or -0.23%.

Hot CPI Number Brings Downside Risk

The Kiwi is vulnerable to a beating if the October consumer price index reading, due to be released at 13:30 GMT, shows that U.S. inflation is still running rampant.

At this time, the market is pricing in a 50 basis point rate hike by the Fed in December. With traders pricing in a 75 basis point rate hike by the RBNZ later in the month, the NZD/USD has received a nice boost for nearly a month. But the bullishness could be dampened later today if the CPI and especially the core CPI shows U.S. inflation is still running hot.

US CPI Data Expected to Come in High

October’s CPI report is the next focal point for investors. Economists expect the consumer price index to rise 0.6% from September. That would mark a jump from 7.9% compared with the same month a year ago, according to Dow Jones.

It would also show chilled growth from September, when the CPI saw a year-over-year gain of 8.2% and a month-over-month gain of 0.4%.

Excluding food and energy, the CPI is expected to rise 0.5% over the prior month and 6.5% year over year. That would be slower than the 0.6% gain with the exclusions in September and the 6.6% seen a year ago.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through .6000 will reaffirm the uptrend. A move through .5741 will change the main trend to down.

The minor range is .5741 to .6000. The NZD/USD is currently testing its pivot at .5871.

Short-term support is at .5837 and .5756.

On the upside, the resistance is the main 50% level at .5991. It stopped the rally at .6000 on Tuesday. The next potential resistance level comes in at .6232.

Daily Swing Chart Technical Forecast

Trader reaction to the minor pivot at .5871 is likely to determine the direction of the NZD/USD on Thursday.

Bullish Scenario

Since the main trend is up, a sustained move over .5871 will indicate the presence of buyers. If this creates enough near-term momentum then look for a surge into the resistance cluster at .5991 – .6000. The latter is a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under .5870 will signal the presence of sellers. This could trigger a quick break into .5837. Taking out this level could trigger an acceleration into a 50% level at .5756, followed by a main bottom at .5741.

Taking out .5741 will not only change the main trend to down, but it could trigger an acceleration to the downside.