NZD/USD: Technical Support Zones Amidst US CPI Anticipation

The NZD/USD currency pair finds itself in a delicate position, currently trading around 0.6246 within an accumulation range. A recent rebound from the 50%-61.8% Fibonacci area, coupled with support from previous price levels, suggests a positive trajectory towards the 0.6200 support area. Technical indicators, such as the Dynamic trendline and the 200 Moving Average, have also played their part as dynamic supports, adding further credence to the potential upward movement.

Fundamental Factors:

Amidst this technical scenario, fundamental factors are also at play. New Zealand recently witnessed a significant decline of 10.6% in Building Permits, reaching a 15-month low. This downturn in the country’s primary housing market indicator could exert bearish pressure on the NZD/USD pair.

On the other side of the equation, the United States is set to reveal its Consumer Price Index (CPI) data for December. Forecasts suggest an increase in both monthly and yearly CPI figures, indicating a potential strengthening of the US Dollar. The anticipated rise is pegged at 0.2% for the monthly figure and 3.2% for the yearly figure. Core inflation is expected to ease slightly on a year-over-year basis, settling at 3.8%, while the month-over-month change is projected to remain steady at 0.3%.

Market sentiment is also influenced by expectations of five rate cuts by the US Federal Reserve (Fed) throughout 2024. This anticipation is contributing to the subdued performance of the US Dollar Index (DXY), driven in part by softer US Treasury yields.

Technical Resilience:

Despite the challenging fundamental landscape, the technical outlook for the NZD/USD pair remains resilient. The support from the Dynamic trendline, the 200 Moving Average, and the rebound from key Fibonacci levels suggests a potential push upward in the aftermath of the CPI release. Traders and investors will be closely watching for any signs of strength in the NZD/USD pair, especially if it manages to breach the 0.6246 accumulation range convincingly.

Conclusion:

The NZD/USD currency pair is currently at a crossroads, balancing technical resilience against fundamental headwinds. The recent decline in New Zealand’s Building Permits and the upcoming release of US CPI data add layers of complexity to the market dynamics. As traders navigate these uncertainties, attention to both technical indicators and fundamental developments will be crucial in making informed decisions. The potential for a new push up in the NZD/USD price post-CPI release adds an intriguing element to an already nuanced currency market landscape.