NZD/USD retreats after hitting nearly three-month high, bullish potential intact – by hareshmenghani NZDUSD Inflation Fed RBNZ Currencies
r the past two weeks or so. The momentum picks up pace following the release of the latest US consumer inflation figures and lifts spot prices to a nearly three-month high, around the 0.6380 region during the early North American session.
The US Dollar weakens across the board after the US Bureau of Labor Statistics reported that inflation in the US, as measured by the rose 0.4% in April and the yearly rate eased to 4.9% from 5%. Meanwhile, the Core CPI, which excludes volatile food and energy prices, came in at 0.4% and 5.5% on monthly and yearly basis, respectively.
The markets, meanwhile, have also started pricing in the possibility that the US central bank will start cutting interestlater this year, which, along with concerns about the US debt ceiling, leads to a fresh leg down in the US Treasury bond yields. It is worth recalling that US President Joe Biden and House of Representatives Speaker Kevin McCarthy remained divided over raising the $31.4 trillion US debt limit, though agreed to continue talks aimed at breaking the deadlock.
The New Zealand Dollar draws additional support from expectations for further rate hikes by the Reserve Bank of New Zealand . This, in turn, suggests that the path of least resistance foris to the upside. That said, the Relative Strength Index on hourly and daily charts has moved on the verge of breaking into the overbought territory. This, in turn, prompts some profit-taking and leads to a modest pullback of around 30 pips in the last hour.
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