NZD is G10’s best-performer so far today. But will it last?

• Markets boosted the “kiwi” after “hawkish” RBNZ signals
   
• More action expected with US CPI, FOMC minutes to be released
   
• Softer US inflation may boost NZDUSD by further 700 points
   
• Still-elevated CPI may force NZDUSD to fall by some 200-400 points

 

The Kiwi is currently the best-performing G10 currency against the US dollar!

NZDUSD surged after the Reserve Bank of New Zealand (RBNZ) left its Official Cash Rate unchanged at 5.5%, as widely expected.

More importantly for Kiwi bulls (those hoping that NZDUSD would go higher) ...

the RBNZ said that its policy needs to be “restrictive for a sustained period”.

And as we know, markets tend to reward the currency of the economy whose interest rates can stay higher for longer.

 

Following the RBNZ decision, NZDUSD a.k.a the “kiwi” saw a price movement range of over 300 points rallying to a high of 0.60774.

This psychological 0.60700 level will be closely monitored ahead of today’s US CPI release!

The US consumer price index (CPI) measures the rate of inflation, that is, the changes in the prices of a basket of goods and services over a period, in the United States.

The incoming data is expected to show:

•  Headline CPI in March 2024 vs. March 2023 (year-on-year): 3.4%
  If that is the case, that 3.4% would be higher than February’s 3.2% year-on-year figure
  
   
• Headline CPI in March 2024 vs. February 2024 (month-on-month): 0.3%
  If that is the case, that 0.3% would be lower than February’s 0.4% month-on-month figure
  
   
• Core CPI (excluding food and energy prices) year-on-year: 3.7%
  If that is the case, that 3.7% would be lower than February’s 3.8% year-on-year figure
  
   
• Core CPI month-on-month: 0.3%
  If that is the case, that 0.3% would be lower than February’s 0.4% month-on-month figure.

 

 

POTENTIAL SCENARIOS:

• A hotter-than-expected US CPI report may be seen as bullish for the US dollar, likely dragging NZDUSD lower.
  
   
• A softer-than-expected US CPI report may be interpreted as bearish for the greenback, perhaps even lifting NZDUSD past its 50-day SMA (simple moving average).

 

 

But wait, there’s more …

More FX volatility could be expected after the US CPI announcement.

The FOMC’s March meeting minutes are due to be released at 6:00 pm GMT today (Wednesday, April 10th).

• NZDUSD may move lower if the FOMC minutes show that the US central bank is less convinced about the prospects of 75-basis points in cuts for this year, instead preferring fewer rate cuts.
   
• However, NZDUSD could be given a boost if policymakers have greater confidence (more than they’ve conveyed to the public so far) that they can follow through with the 75-basis points of rate cuts pencilled in last month.

 

 

Looking at the chart above …

NZDUSD has rallied for over 1300 points from its year-to-date low at 0.59391.

A surprisingly soft US CPI, with the year-on-year figures close to 3%, may turbocharge the “kiwi” upwards by a further 700 points!

This could send NZDUSD to an upper trendline resistance around 0.61382!

 Possible near-term resistance:

• 0.60839: the 100% Fibonacci level which is the current zone of the 50-day simple moving average (SMA)

The Fibonacci retracement levels are taken from the December 13th low at 0.60839 to the December 28th high at 0.63692.

 

On hotter-than-expected US CPI data, the US dollar may strengthen, which sets Kiwi up for a decline.

Possible near-term support can be seen at

• 0.60506: an important price level, and upward trendline on the 4-hour timeframe.
   
• 0.60319: the 21-day SMA

 

 

RBNZ New Zealand Dollar Reserve Bank of New Zealand USD CPI inflation Federal Reserve