WIKIFX REPORT: NZD RALLY CONTINUES

NZD/USD has posted strong gains today. In the North American session, NZD/USD is trading at 0.6452, up 0.75% on the day. It has been a banner for the kiwi, which has jumped by a massive 3.37%.

The Federal Reserve is breathing easier as inflation has finally slowed, and it is more likely now than 24 hours ago that the Fed will ease up on rate hikes and deliver a 0.50% increase in September rather than a 0.75% hike. The US inflation report was the story of the week and the headline CPI for July surprised markets with a reading of 8.5%, which was lower than expected. This was much lower than Junes reading of 9.1% and also lower than the 8.7% forecast. On Wednesday this pushed the US dollar lower against the majors, and NZD/USD gained 1.85%.

In New Zealand, the Q2 Inflation Expectations fell to 3.07% from Q1‘s 3.27%. This was the first slowing down in more than two years and will fuel hopes that inflation might be easing. The Food Price Index however rose to 2.1% in Q2, up from Q1’s 1.2%. As food is a volatile consumer price item, only time will tell if the index continues rising or if this was a single spike.

The week will close with a key confidence indicator, UoM Consumer Sentiment. With US consumers hammered by rising mortgage payments and soaring inflation, its not surprising the index fell to 51.5 in June from 65.7 in March.

NZD/USD Technical

• NZD/USD is testing resistance at 0.6410. Above, there is resistance at 0.6495

• There is support at 0.6326 and 0.6227