NZD/USD Post CPI, Fundamental and Technical Analysis

The Reserve Bank of New Zealand

Fundamental Analysis

With the New Zealand 3rd quarter Consumer Price Index release beating expectations, NZD/USD held all of the major technical levels that we had been watching. Especially important was the 0.71977 (give or take) daily level.

The NZ CPI (YoY) printed +1.9%, beating expectations of +1.8% for the 3Q. The NZ CPI (QoQ) also came in at +0.5%, also beating expectations of +0.4% for the 3Q.

While the headline print was substantially higher than forecasts from the RBNZ, headline risk around the formation of government in New Zealand seems to be putting a bit of a damper on things.

Here are Imre Speizer's thoughts on the Kiwi, a Research Analyst at Westpac:

“Regarding local factors, we have NZ CPI, which we expect to register a temporary spike and thus pose upside risks for the NZD. Same goes for the GDT dairy auction (2% gain in WMP priced by futures). In addition, there’s the government formation announcement, which poses two-way risks.”

It's never a good sign for price when you get a hugely significant piece of data that beats expectations, but price barely moves. All of this uncertainty points to the possibility of some nice bearish price action to short.

Technical Analysis

Moving onto the technicals, this is where we can start to identify some levels.

Click the link to yesterday's blog in the first paragraph above, or go and check out the trade thread on my Twitter feed for the higher time frame level if you missed it, but that 0.71977 level is the bottom of a higher time frame resistance zone that's in play:

NZD/USD Hourly

With higher time frame resistance having held, the play has always been about finding previous short term support that could potentially turn to resistance and see price drop down hard out of.

This looks a pretty obvious level in terms of the types of setups I like to look for, but price just doesn't seem to want to drop hard out of it... yet.

There are those couple of red intraday candles with perfect retests and bounces that you can see on that chart, but both have failed pretty miserably.

If you're in already, then your initial stop is above the higher timer frame resistance zone and then looking to build a bigger short position as price hopefully steps lower.

Let's see what today brings.

Peace.

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