NZ CPI Rises As Expected | NZD/CHF On Cusp Of A Breakout
Matt Simpson July 16, 2019 4:26 AM
Whilst inflation is not exactly running hot, it does alleviate some pressure for RBNZ to ease again in August. And has kept NZD as the strongest major this past month.
Inflation data for New Zealand came in on target to see both annual and quarterly rise to 1.7% and 0.6% respectively. At 1.7%, it’s not too far from the centre band of their 1-3% inflation and CPI has clearly come a long way since its cycle low in 2016. And given RBNZ are watching inflation and employment data closely ahead of their 7th August meeting, it lowers the potential for further easing if employment is to improve.
At their last meeting, RBNZ weren’t quite as dovish as expected, although they added a lower cash rate ‘may’ be needed over time which still left the door open for it. Still, even if August is another hold, the NZD 5 and 6-month NZD overnight index swaps have full priced in a 25bps cut by the end of the year.
NZD has remained the strongest major over the past month which has seen the bearish trends on GBP/NZD and EUR/NZD develop nicely. As my colleague Fawad Razaqzada highlighted yesterday, GBP/NZD is near key support levels to the potential for a pullback could be on the horizon before the trend continues.
However, we’re now watching NZD/CHF for a break higher and technical suggest we may have seen a significant low. The lower indicator is measuring a % rally from a 3-month high and low. We can see that the cross has fallen around 5% over the prior 60 days, a decline that saw a sizable bounce for NZD/CHF in January. Obviously, we do have the benefit of hindsight here as prices have since recovered about 3.5%. But the rebound is constructive, formed a V-bottom and provided a higher high and low with a shallow pullback.
- Today’s CPI data has seen it break to a new cycle high and now testing the March trendline
- A break of the trendline opens-up a run for 0.6695 resistance
- If we are to see a similar rebound in percentage terms like we saw in January, it could eventually head for the April high
- The bias remains bullish above 0.6527, whereas a break below 0.6527 suggests the bearish trend from the 2019 is set to resume.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.