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NZD/USD slides after New Zealand inflation tops estimates
New Zealand’s inflation picked up to 4.1% year over year, but the New Zealand dollar gave back gains as US-Iran tensions increased demand for the US dollar as a safe haven.
Stats NZ reported that New Zealand’s Consumer Price Index rose 1.5% in the second quarter, lifting the annual inflation rate to 4.1%, its highest level in more than two years and just above analysts’ 4.0% consensus expectation. The report said higher fuel prices were the main driver, with the inflation release landing after the Reserve Bank of New Zealand raised the official cash rate to 2.50% on 8 July.
Despite the upside inflation signal, the NZD/USD reaction proved short-lived, as escalating tensions between the US and Iran boosted demand for the US dollar as a safe haven. According to Action Forex, that helped the New Zealand dollar surrender part of its recent gains during the second half of the week.
On technical levels, the pair broke below its short-term uptrend line and fell under the lower boundary of the current market profile, dropping toward 0.5765, where support is highlighted. After rebounding, NZD/USD tested the lower boundary near 0.5810, with attention shifting to nearby zones around 0.5840 for a possible return higher.
The outlook, the outlet added, will depend on whether the lower boundary holds, since the near-term bias is linked to the balance between a stronger US dollar driven by Middle East tensions and the support from New Zealand’s unexpectedly strong inflation data. Action Forex also noted mixed momentum signals, with RSI and moving averages not confirming a strong breakout.