New Zealand Dollar Ahead of US CPI; NZD/USD, AUD/NZD, EUR/NZD Price Action

NZD/USD, AUD/NZD, EUR/NZD – Outlook:

• NZD continues to broadly hover within its recent range against some of its peers.
• NZD has been weighed by a deteriorating NZ economic growth outlook and the view that RBNZ is done with raising rates.
• What is the outlook for NZD/USD, EUR/NZD, and AUD/NZD?

The New Zealand dollar appears to have taken a back seat against some of its peers amid a deteriorating New Zealand economic outlook and the growing view that the Reserve Bank of New Zealand (RBNZ) is done with raising rates.

The relative monetary policy appears to be shifting marginally in favour of USD – the US Federal Reserve data-dependent approach with regards to future tightening, compared with RBNZ which signaled in May that it is done with hiking rates in the foreseeable future. Furthermore, US economic growth outlook has improved in recent months, but NZ growth expectations for the current year continue to be downgraded.

The key focus is now on US inflation data due Thursday – consumer prices rebounded to 3.3% on-year in July from 3.0% in June. Core CPI is expected to have remained flat at 4.8% on-year in July. Markets expect the Fed to hold rates when it meets in late September, though there will be one more CPI reading (after this week’s) and jobs early September, that could influence the pricing. Data published on Friday showed the US jobs market remains tight even as hiring seems to have slowed.

NZD/USD Daily Chart

Chart Created Using TradingView

NZD/USD: Drifting lower?

On technical charts, NZD/USD continues to hover within its well-established range of 0.6000-0.6400 since March. The failure to sustain any gains since mid-July raises the odds of a drop toward the lower end of the range. While not to pre-empt the break, any fall below the May low of 0.6000 would accentuate the bearish pressure, potentially toward the lower end of a slightly downward-sloping channel (now at about 0.5850).

EUR/NZD Daily Chart

Chart Created Using TradingView

EUR/NZD: Resilience amidst the choppiness

Despite the recent choppiness, EUR/NZD has managed to cruise along a slightly upward-sloping channel since May. Importantly, the cross hasn’t broken below any key support, reaffirming the uptrend. For the uptrend to fade, at minimum, the cross would need to fall below initial support at the end-July low of 1.7685. Such a break would bring into play the broader range of 1.72-1.81.

AUD/NZD Daily Chart

Chart Created Using TradingView

AUD/NZD: In search of a direction

Not much of a change in the AUD/NZD sideways trend prevailing since the start of the year. The broader range established is 1.05-1.11. In the past week or so, the range has narrowed to 1.07-1.09. It is now testing the lower end of the range. While it is premature to conclude, any break below 1.07 could pave the way toward the lower end of the broader range around 1.05.

— Written by Manish Jaradi, Strategist for DailyFX.com

— Contact and follow Jaradi on Twitter: @JaradiManish