NZDUSD drops as inflation eases in New Zealand and US manufacturing weakens

NZDUSD Analysis

Performance after Tuesday
Period	Pct	Chg	Momentum
Tuesday	-0.51%	-31.3 Pips
Week to-date	-4.54%	-288 Pips
October	-4.47%	-283.5 Pips

Upcoming key events (London Time)

Thu 01:30 PM USD Monthly Retail Trade (1-mth)

What happened lately

In New Zealand, the Consumer Price Index (CPI) inflation rate for the third quarter experienced a decrease, moving from 3.3% in the second quarter to 2.2% in the third quarter as reported by Stats NZ. This indicates a deceleration in the year-on-year inflation, suggesting that price pressures may be easing. However, on a quarterly basis, there was an increase in inflation from 0.4% in Q2 to 0.6% in Q3 within New Zealand, indicating some short-term uptick in prices. This nuanced economic situation presents a mix of easing annual inflation with a slight quarterly uptick.

In the United States, the New York Empire State Manufacturing Index indicates a significant downturn, falling sharply to -11.9 points in October from a previous 11.5 points in September as per reports from the New York Fed. This substantial drop suggests that the manufacturing sector is experiencing a contraction, which could signal broader economic challenges or reduced industrial activity. It reflects the growing pressures on manufacturing, possibly linked to factors such as supply chain disruptions or changing demand dynamics.

For the NZDUSD currency pair, the receipt of this news seems to have been less than favorable. The New Zealand dollar experienced a decline of 0.51% against the US dollar, bringing the exchange rate to 0.60618. The falling New Zealand inflation rate could imply less pressure on the New Zealand Central Bank to continue with aggressive interest rate hikes, potentially weakening the NZD. Meanwhile, the negative sentiment from the US manufacturing sector, although representing economic challenges, might already have been priced into the USD, but upcoming events such as the US Monthly Retail Trade data could further influence market direction. If the upcoming retail data exceeds expectations, it might provide support for the USD, maintaining downward pressure on the NZDUSD pair. Conversely, weaker retail figures could benefit the NZD in the short term.

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What can we expect from NZDUSD today?

NZDUSD on Tuesday dropped -0.51% to 0.60618. Price is below 9-Day EMA while Stochastic is rising.

Updated daily direction for NZDUSD looks bearish as the pair posted lower in Tuesday trading session.

Looking ahead for the day, immediate support level is at S1 0.60415 with break below could see further selling pressure towards S2 at 0.60213. To the upside, with the current momentum bearish, we prefer to look at breakout of the recent daily high of 0.61060 as a potential indicator of buying interest. Failure to break the resistance level would continue to echo bearish sentiment. A close below 0.60535 would indicate selling pressure.

For the week to-date, take note that NZDUSD is bearish as the pair posted lower by -4.54%.

Key levels to watch out:

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