Ella 
In early European trading on Thursday, NZD/USD was still hovering around 0.6065-70, recording its first rise in three days. The upbeat inflation signal from the New York Reserve Bank’s survey the day before supported the currency pair’s rise, while preparing for the release of the U.S. July consumer price index (CPI) at 20:30 tonight.
The Reserve Bank of New Zealand (RBNZ) released mixed inflation forecasts for the third quarter (Q3) of 2023, with the two-year inflation forecast inching up to 2.83% from 2.79% previously. However, average one-year inflation expectations for New Zealand in 2023 fell further, to 4.17% in the third quarter from 4.28% previously.
On the other hand, based on early signals that flashed last week, US inflation data may be softer, coupled with the market preparing for a hawkish surprise from the Reserve Bank of New Zealand at its monetary policy meeting next week, which will push NZD/USD prices higher.
In addition, the recent downbeat MBA mortgage applications fell for the third consecutive week, also testing the dollar bulls, especially against the backdrop of increasing rumors of the Fed’s policy shift, which in turn provided support for the New Zealand dollar price. It should be noted that the CME Group’s FedWatch tool shows that the market is pricing in an 86% probability that the Fed will pause rate hikes in September.
Therefore, despite the tense Sino-US and Sino-UK relations, the trend of the currency pair also reflects the cautious optimism of the market sentiment. Nevertheless, the British “Financial Times” (FT) released news that British Prime Minister Sunak (Rishi Sunak) is weighing whether to follow the example of US President Joe Biden (Joe Biden) to limit foreign investment in China’s technology sector, including artificial intelligence, chips, etc. and quantum computing. According to Reuters, the move comes after U.S. President Joe Biden signed the highly anticipated bill allowing the U.S. Treasury Department to ban or limit certain U.S. investments in Chinese entities.
Against this backdrop, S&P 500 futures edged higher despite a poor close on Wall Street, while U.S. Treasury yields pared weekly losses.
Today’s US CPI is key as recent US jobs data has been lackluster and early signals of price pressures have disappointed. Thus, an upbeat outcome could shatter fears that Fed rates are nearing a peak and could wake up the pair’s bears.
Failure to close below the June bottom at 0.6050, combined with an oversold RSI, will trigger a rebound correction in NZD/USD. However, the bulls are still on the sidelines, unless it breaks the falling resistance line around 0.6135 a month ago.
