Kiwi could be facing a critical day ahead with the quarterly inflation expectations report. Note RBNZ policy rates are among the highest in the developed world matching the US Fed at 5.50%. The general consensus has been for New Zealand to stick to a tight monetary regime until inflation is within target. Contrast this to pressure for the US to cut given the recent weakness from the Jobs market and other economic front.
Resistance
- 0.61073 – Daily High
- 0.60820 – Daily Low / High
- 0.60474 – Daily Low / High
Support
- 0.60094 – 50D Moving Average
- 0.59810 – Daily High / Low
- 0.59561 – 20D Moving Average
We have previously triggered an inverted head and shoulder in NZDUSD following a series of weak economic releases for the US. Technically the pattern’s target is equal to A’, around 0.61408. The past week has mostly been a range play after the pattern breakout though we look to the inflation report to potentially reignite bullish interest. A statement suggesting status quo due to persistent inflationary pressures will have us looking for a follow through going long at the break of Friday highs. Note our immediate support is the 50D Moving Average. Should the statement suggests further weakening on inflation pressures we would look for prices to push under the 50D Moving Average easing off to the 20D Moving Average.
NZDJPY Carry Trade
Something to consider is the carry trade with the Japanese Yen, with policy rates for New Zealand and the US both at 5.5% giving longs for the pair a considerable return in swap. Chart wise we can actually see Kiwi at these levels from the 2007s unlike most other pairs where one has to go back to before the millennia.
