NZD/USD. Analysis and Forecast

[Ben Graham]

The NZD/USD pair has been under selling pressure for the fourth consecutive day. Spot prices remain subdued and showed little improvement after the release of the latest inflation data from China.

China's National Bureau of Statistics (NBS) reported that the Consumer Price Index (CPI) rose by 0.8% year over year in December, up from 0.7% the previous month, although the figure fell short of the forecast 0.9%.

At the same time, the Producer Price Index (PPI) declined by 1.9% year over year, compared with a 2.2% drop in November, signaling a moderation in deflationary pressures. However, these figures failed to provide a meaningful boost to the Australian and New Zealand currencies, including the New Zealand dollar. Rising geopolitical tensions are supporting the U.S. dollar as a safe-haven asset, allowing it to extend its weekly advance to a monthly high and continue exerting pressure on the risk-sensitive New Zealand dollar.

Nevertheless, the release of the highly anticipated U.S. Nonfarm Payrolls (NFP) report helped the NZD/USD pair halt its decline.

Expectations of interest rate cuts by the Federal Reserve may also limit further gains in the U.S. dollar. In addition, the hawkish rhetoric of the Reserve Bank of New Zealand (RBNZ) regarding future policy is lending support to the New Zealand dollar, helping to contain losses in the NZD/USD pair. In particular, RBNZ Governor Anna Breman noted that current interest rates are likely to be kept at this level for a longer period, given the expected economic outlook. This encourages caution among NZD/USD bears, and it would be more prudent to wait for a sustained break below the 50-day SMA at 0.5730 before opening new short positions.

For now, prices have found support at the 50-day SMA, while resistance is seen at the 0.5750 level. It is also worth noting that oscillators on the daily chart are mixed, with the Relative Strength Index having moved into negative territory, confirming bullish weakness in the NZD/USD pair, which appears to be locking in losses.

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