Kiwi Declines On Soft CPI Data, Raise Rate Cut Expectations

Fundamental Analysis

* CPI Drag: The New Zealand dollar declined against the US dollar after New Zealand’s CPI data came in weaker than expected, heightening speculation about a possible rate cut from the RBNZ. Government figures showed the CPI rose by 3.3% year-on-year for the quarter ending June 30, below the forecasted 3.5% and down from 4% in the previous quarter. This softer CPI was primarily driven by reduced spending on discretionary and recreational items, reflecting a drop in consumer spending amid high interest rates and relatively high inflation. Although the CPI is still above the RBNZ’s annual target range of 1% to 3%, it is projected to fall within the target range in the latter half of 2024, according to the central bank’s forecast. In its July meeting, the RBNZ suggested that any interest rate cuts would depend largely on easing inflation. The latest CPI data has bolstered expectations that the central bank will feel confident enough to begin cutting rates later this year.

Technical Analysis

* Technical Breakout: NZDUSD was traded lower while currently testing the support level 0.60700. MACD which illustrate bearish momentum signal suggest the pair to extend its losses after it breaks below the support level.

* Resistance and Support: If the bearish momentum persists, there’s a strong likelihood that the price will potentially head towards 0.60350 after it breach below the level 0.60700. Conversely, a potential reversal is also to be expected and the price could head towards 0.61180.

Potential Risks

Moving ahead, traders will seek further direction from the US weekly Initial Jobless Claims and the Philly Fed Manufacturing Index on Thursday. Additionally, remarks from the Fed’s Lorie Logan, scheduled for later in the day, will be closely monitored for fresh impetus.

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Monitoring

Stay updated on US and New Zealand data, central bank updates and any shifts in the US Dollar’s strength by following PU Xtrader’s financial news page.

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