NZDUSD outperforms ahead of Q3 inflation data

Posing the most serious threat to global growth into year-end an acceleration in inflation.

While most have been willing to look at higher inflation as a phenomenon of the reopening and supply and labour bottlenecks, a sharp rise in energy prices is kicking inflation higher again and prompting second thoughts.

The pain of the energy crises and rising prices is being felt most acutely in Europe. However, prices have also increased in the US and Asia as higher oil and gas prices are passed onto the consumer.

Evidence of the concern this is causing central banks in Asia, the surprise tightening of monetary policy by the Monetary Authority of Singapore (MAS) yesterday. On Monday next week, attention turns to New Zealand for the release of Q3 inflation data.

Apart from the global inflation drivers mentioned above, inflation in NZ is being fuelled by a strong labour market and rising wage inflation which indicates the risks for Monday's inflation data is to the upside.

For the record, the market is looking for prices to rise by 1.4% q/q, pushing the annual rate above 4% for the first time in a decade. All but guaranteeing the RBNZ will hike rates again in November and the reason why a 25bp hike is 95% priced.

Turning now to the currency. The NZDUSD outperformed overnight, closing 1% higher near .7037. After testing and rebounding from ahead of the bottom of the range .6850/00, the bias is for the NZDUSD to test the solid medium-term resistance coming from the 200-day ma and trend channel resistance near .7100.

Should the NZDUSD break and close above .7100, it would indicate that the correction from the February .7465 high is complete, and the uptrend has resumed towards .7500c.  

NZDUSD Daily Chart 15th of October

Source Tradingview. The figures stated areas of October 15th, 2021. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

How to trade with City Index

You can trade easily trade with City Index by using these four easy steps:

  1. Open an account, or log in if you’re already a customer 

    Open an account in the UK
    Open an account in Australia
    Open an account in Singapore

  2. Search for the company you want to trade in our award-winning platform 
  3. Choose your position and size, and your stop and limit levels 
  4. Place the trade

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

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.

For further details see our full non-independent research disclaimer and quarterly summary.