Key points:
- NZDUSD trading around $0.614 ahead of key US inflation data.
- RBNZ began easing its policy with a 25-bps cut in August, with more cuts expected.
- Traders are closely watching the Fed’s next move, as inflation data could influence future rate cuts.
The New Zealand dollar held firm around $0.614 on Thursday as investors focused on the upcoming US consumer inflation report.
Picture: NZDUSD trading flat ahead of key US inflation data, as observed on the VT Markets app.
With this key report in the horizon the, NZD/USD pair has been trading in a relatively tight range, with the price hovering around the 0.6150 level. The 30-minute chart shows that the price has struggled to break out of the range between 0.6142 and 0.6160 over the past two days, with no clear momentum in either direction.
The EMA (24, 24, 72) is sloping downward, reflecting the broader bearish trend that started earlier in the month. Meanwhile, the MACD remains neutral, with the histogram flattening, signaling a lack of momentum.
At the moment, the NZD/USD remains range-bound, and traders should watch for a breakout above 0.6160 or a breakdown below 0.6142 for clearer direction. In the absence of significant economic data or events, the pair may continue to consolidate in this narrow range until the U.S. inflation report is released.
We believe that the upcoming U.S. inflation report is expected to influence market direction. A softer-than-expected inflation figure could lead to speculation of a more aggressive rate cut by the Federal Reserve, which would likely weaken the U.S. dollar and push the NZD/USD higher.
Conversely, a stronger inflation reading could prompt the Fed to take a more cautious stance, putting downward pressure on the pair.
Surprise rate cut by the RBNZ
Within New Zealand itself, the Reserve Bank of New Zealand (RBNZ) has already surprised the markets by starting its rate-cutting cycle in August with a 25-basis point cut.
This marked a major shift after the central bank spent much of the last two years tightening monetary policy to rein in inflation. The RBNZ is expected to continue with additional rate cuts in its last two meetings this year.
Read also: Interest rate tug-of-war for central banks
Market participants currently anticipate the RBNZ’s cash rate, which stands at 5.25%, to decline to 3.0% by late next year.
Outlook for the Kiwi
Traders should brace for potential volatility in the NZDUSD currency pair as both US CPI data and the Federal Reserve’s next policy moves come into focus.
