Kiwi Dollar Plunges After Downbeat Inflation News

The New Zealand Dollar (NZD) extended downside movement against the US Dollar (USD) on Monday, dragging the price of NZDUSD to less than 0.7100 as sellers remain in control amid inflation news. The technical bias however remains bullish because of a Higher High in the recent upside rally.

Technical Analysis

As of this writing, the pair is being traded near 0.7102. A support may be noted around 0.7055, a major horizontal support as demonstrated in the given below daily chart. A break and daily closing below the 0.7055 support area will incite renewed selling pressure, validating a move towards the 0.6969, the swing low of the latest major downside move.

On the upside, the pair is likely to face a hurdle near 0.7174, the intraday low of yesterday ahead of 0.7325, the high of the latest major upside rally and then 0.7500, a major psychological milestone. The technical bias will remain bullish as long as the 0.6969 support area is intact.

New Zealand Inflation

New Zealand consumer prices rose 0.4% in the second quarter and were up 0.4% from a year earlier, Statistics New Zealand said Monday. Economists had expected the consumer prices to rise 0.6% in the quarter and 0.6% from a year earlier.

Some economists said the RBNZ might be considering a cut in the interest rates soon to offset concerns about slowing world growth and an elevated currency. Still, an interest rate cut now might exacerbate tensions around rising house prices and fears of potential financial sector instability.

Trade Idea

Considering the overall technical outlook, buying the pair near the mentioned support levels upon emergence of a valid bullish reversal candle appears to be a good strategy in short to medium term.'
Usman Ahmed

Usman Ahmed is an individual forex trader and market analyst. He holds a Masters of Business Administration (MBA) degree. His work includes fundamental and technical reports on various currency pairs, commodity futures and stock markets. His technical analysis features price action strategies.

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