Signs of rate cut after weak New Zealand Inflation data

The NZD dropped sharply on Monday after inflation dropped unexpectedly in the second quarter. Consumer prices in New Zealand raised 0.4% y/y in the June quarter of 2016, which is similar to the previous period and lower than market expectations of a 0.5% increase.

Housing-related prices continued to be the main upward contributor, up 3.3% in the year, which was fuelled by higher cost for newly built houses, excluding land (up 5.6%), and rentals for housing (up 2.3%). In contrast, transport prices declined 5.3% as prices for petrol and domestic airfares fell.

On a monthly basis, consumer prices also rose 0.4%, following a 0.2% gain in the March 2016 quarter. Higher petrol and housing-related prices were countered by lower prices for meat and domestic airfares. Petrol prices showed the largest upward contribution, up 5.3%

Technical Insights

In a longer-term perspective from the daily chart of NZD/USD, the upward trend is still maintained, but facing downward pressure. The next key support to look out for is at the level of 0.68580.



Moving on to the shorter-term perspective at the 15min chart of NZD/USD, the currency is trading within a bearish channel. Resistance at 0.71248 and support at 0.70686 are critical levels to watch out for.