The New Zealand dollar is on the slide against the US dollar currency due to the RBNZ as it appears increasingly likely that the upcoming rate hike will be the last in the current cycle due to weaker inflation data.
New Zealand CPI growth slowed down from the prior quarter’s 7.2% yoy, registering a 6.7% yoy increase, falling short of the expected 7.0% yoy. The largest contributor to the annual inflation rate was the food sector, followed by housing and household utilities.
On a quarterly basis, CPI rose by 1.2% qoq in Q1, below the anticipated 1.5% qoq increase, marking the lowest result in two years. Vegetables and fruit were the primary drivers of food prices, rising by 8.6% and 11%.
This data is the preferred measure of the inflation gauge of the RBNZ, and these figures came in lower than RBNZ’s forecast of 1.8% quarter-on-quarter and 7.3% year-on-year inflation.
Despite the sharp drop, I do think the NZDUSD pair is currently signs of a price bottom. However, we really need to see more confirmation as the global economy is still poor, which is something that could affect the performance of the NZDUSD pair.
According to the ActivTrader market sentiment tool, some 75 percent of traders are bullish towards the NZDUSD pair. As we typically look to fade sentiment biases, this could mean the NZDUSD pair could continue to reverse lower.
It is worth mentioning that high levels of bullish sentiment suggest a classic contrarian sentiment trade is still in the making, so do be careful buying this pair at the current level, especially since the dip under the 200-day moving average today.
NZDUSD Short-Term Technical Analysis
The four-hour time frame a show that a strong bearish bias is play as the NZDUSD pair has repeatedly continued to stay under its 200-period moving average, now that is not the case.
Moreover, the downside looks set to continue after a major head and shoulders pattern breakout. The only issue is momentum. The NZDUSD pair must now move under the 0.6100 level or risk a sharp reversal.
NZDUSD Medium-Term Technical Analysis
The daily time frame shows that the pair looks to be undergoing a major trend change below its 200-day moving average. We probably need to see 2 days below the 200-day moving average for confirmation.
According to technical analysis we could see more downside likely while the NZDUSD pair holds under this key metric, a move towards the 0.6000 resistance line could be on the cards.
