Market update: New Zealand dollar ahead of US CPI

The New Zealand dollar appears to have taken a back seat against some of its peers, as the country's economic outlook deteriorates, and the Reserve Bank of New Zealand (RBNZ) signals a halt to rate hikes.

Monetary policy shift favours USD

Relative monetary policy seems to be marginally favoring the US dollar, with the Federal Reserve adopting a data-dependent approach to future tightening. In contrast, the RBNZ signaled in May that it is done with raising rates for the foreseeable future.

US economic growth outperforms NZ

The US economic growth outlook has improved in recent months, while New Zealand's growth expectations for the current year continue to be downgraded. The key focus now shifts to US inflation data due on Thursday, where consumer prices rebounded to 3.3% YoY in July from 3.0% in June. Core CPI is expected to remain flat at 4.8% YoY in July.

NZD/USD technical analysis

On technical charts, NZD/USD continues to hover within its well-established range of 0.6000-0.6400 since March. The lack of sustained gains since mid-July raises the likelihood of a drop toward the lower end of the range. A fall below the May low of 0.6000 would intensify bearish pressure, potentially leading to a move toward the lower end of a slightly downward-sloping channel, currently at about 0.5850.

NZD/USD daily chart

EUR/NZD holds uptrend amid choppiness

Despite recent choppiness, EUR/NZD has maintained its course within a slightly upward-sloping channel since May. Crucially, the cross has remained above key support levels, reinforcing the ongoing uptrend.

To signal a fading uptrend, the cross would need to breach initial support at the end-July low of 1.7685. Such a breach would then open the door to the broader range of 1.72-1.81.

EUR/NZD daily chart

AUD/NZD continues sideways trend with narrowing range

The NZD/AUD pair has shown little alteration in its sideways trend that has persisted since the beginning of the year. The established broader range remains between 1.05 and 1.11. In the recent week, the range has contracted to 1.07-1.09, currently testing the lower boundary.

While it may be early to make definitive conclusions, a breach below 1.07 could potentially set the stage for a move towards the lower end of the broader range around 1.05.

AUD/NZD daily chart

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