NZD/USD Bulls Target December High After US CPI Fails To Inspire Greenback

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New Zealand Dollar, NZD/USD, Chinese Yuan, Omicron, Technical Outlook - Talking Points

  • APAC markets and currencies look primed for bullish Thursday session
  • Hot US CPI print fails to bolster the Greenback and Treasury yields
  • NZD/USD rises, but stops short of the December high and 50-day SMA

Thursday’s Asia-Pacific Outlook

Asia-Pacific currencies saw broad strength against a weak US Dollar overnight after a hotter-than-expected inflation print out of the United States failed to spur any major shifts in Fed rate hike bets. At face value, that was an unusual reaction, but the Fed’s policy calculus has already shifted to a firmer stance on taming rising prices. The New Zealand Dollar gained nearly a full percentage point, while the Chinese Yuan strengthened versus the Greenback.

The drop in USD/CNH was likely more a result of USD weakness rather than internal Yuan strength. The Euro managed to gain against the CNH. Chinese policymakers have signaled that they prefer a weaker Yuan, likely to help fuel the country’s export strength. The Omicron Covid variant has triggered several lockdowns as China sticks with its Covid-zero strategy. That could very well weaken economic growth in the first half of this year. Goldman Sachs downgraded its growth forecast for China this year because of that, with the bank shaving 0.9% off its 2022 outlook.

Elsewhere, New Zealand’s Covid situation remains cautious, but the island nation has avoided a large spike in cases. The Ministry of Health reported 28 new community cases on Wednesday and 65 new border cases. This morning, New Zealand reported a 0.6% month-over-month rise in building permits for November, up from October’s -2.1% figure.

Today’s economic calendar is relatively sparse, which may leave the prevailing risk-on mood untouched. Thailand will see December consumer confidence data cross the wires. Japan is set to report machine tool orders (Dec), and the Philippines’s foreign exchange reserves (Dec) will also cross the wires. China’s December trade balance will shift into focus to cap the APAC trading week off.

NZD/USD Technical Forecast

Prices broke above the 78.6% Fibonacci retracement level, aiming at the December high at 0.6867 before upside eased slightly short of the falling 50-day Simple Moving Average (SMA). If NZD/USD pierces above those levels, the 100-day SMA is a possible target for bulls. The MACD oscillator is signaling healthy momentum as the MACD line looks to break above the center line, which would be a bullish sign.

NZD/USD Daily Chart

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Chart created with TradingView

--- Written by Thomas Westwater, Analyst for DailyFX.com

To contact Thomas, use the comments section below or @FxWestwater on Twitter