NZDUSD is under selling pressure in today’s Asian session following the negative inflation report from New Zealand. As of this writing, the currency pair is trading at 0.6558, down from its opening price at 0.6570.
Late last night, Statistics New Zealand reported that CPI for the second quarter of 2020 printed at -0.5%. While this came in as expected, it does mark a significant slide from its previous reading of 0.8%. The contraction consequently sparked rumors that the RBNZ may soon cut rates in response to the report. A negative CPI reading is bearish for a currency because it suggests that sluggish economic growth is weighing down prices.
Meanwhile, this morning, China’s GDP report for Q2 2020 printed at 3.2% which is higher than the 2.2% forecast. This could help boost NZDUSD because positive Chinese economic growth is typically seen as an indicator of global growth. Whether or not that would be the case in today’s trading, we have yet to see.
On the 1-hour time frame, it can be seen that NZDUSD has recently found resistance at the falling trendline (from connecting the highs of July 9, July 13, and July 15). If there are enough sellers in the market, we could soon see the currency pair fall to its July 14 lows at 0.6508. This price was where the currency pair bottomed on July 14.
On the other hand, it’s worth pointing out that NZDUSD is still testing support at the 100 SMA and 200 SMA. Reversal candlesticks have formed which could suggest that the currency pair may soon trade higher. If there are enough buyers in the market, NZDUSD could trade higher to 0.6570 and retest the trendline resistance. A strong bullish close above this price could indicate that NZDUSD may soon retest its July 13 highs at 0.6592.