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NZDUSD: NZD to USD Retreats as Weak CPI Point to Negative Rates


The NZD to USD (NZDUSD) is down slightly today as investors react to the relatively disappointing consumer price index (CPI) data from New Zealand.

Consumer prices in New Zealand bounced back in the third quarter as the country continued its recovery process. According to the country’s bureau of statistics, consumer prices rose by 0.7% in the third quarter after falling by 0.7% in the second quarter. That increase was slightly below the 0.9% that analysts were expecting. On an annualised basis, consumer prices rose by 1.4%, less than the expected 1.7%.

The bureau said that prices of most items rose, led by vegetables and petrol prices. Still, analysts expect that the prices will remain low as the country experiences higher inflation rate. At the same time, in its most recent meeting, the RBNZ said that it expects the inflation to slow to 0.3% at the end of 2021. As such, analysts expect that the bank will do more to stimulate the economy. Among the options available are more quantitative easing and negative rates. Just this week, the governor said:

“I’d prefer to be battling with the quality problem of re-containing high inflation than the real challenge of battling deflation.”

NZDUSD technical outlook

The 45-minute chart shows that the NZDUSD price has fallen from this week’s high of 0.6690 to a low of 0.6662. The 25-day and 15-day moving averages have made a bearish crossover. Also, the pair has formed a head and shoulders pattern.

The price is also below the descending trendline that is shown in purple while the Relative Strength Index (RSI) has moved from the overbought level of 70 to the current 45.

Therefore, I suspect that the price will continue falling as bears aim for the 38.2% Fibonacci retracement level at 0.6636. On the flip side, a move above this week’s high of 0.6690 will invalidate this trend.

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NZD to USD technical chart

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