NZDUSD is finding bids in today’s trading after New Zealand’s CPI report for Q1 2020 topped expectations. While the currency pair is down by 13 pips from its opening price as it trades at 0.6018, it is testing a critical support level.
Late last night, Statistics New Zealand reported a 0.8% uptick in consumer prices for the first quarter of 2020. This reading was higher than the consensus which was for a 0.5% uptick. Additionally, this number translates to a 2.5% increase in annualized basis and is higher than the 1.9% estimate for yearly CPI.
A closer look at the data shows that the increase in price of cigarettes and rent drove prices higher during the quarter. It’s worth mentioning, however, that this data does not fully reflect the impact of the coronavirus to the economy because the government only imposed its lockdown in late March.
On the 1-hour time frame, it can be seen that NZDUSD is testing support at the rising trend line (from connecting the lows of April 16 and April 17). The current price where the currency pair is trading, around 0.6015, also coincides with the area between the 38.2% and 50% Fib levels (when you draw the Fibonacci retracement tool from the intraday low of April 17 to its intraday high). There are already reversal candlesticks which could indicate that buyers may be getting ready to push NZDUSD higher. Near-term resistance for the currency pair is at 0.6050 where it topped on April 17. However, if it does not hold, the next ceiling would be at 0.6107 where NZDUSD peaked on April 15.
Alternatively, a strong bearish close below today’s Asian session low of 0.6008 would invalidate the support level. It could suggest that sellers will dominate trading and push NZDUSD to support at its April 16 lows at 0.5933.