The NZD/USD price fell slightly as traders responded to New Zealand CPI data.
Consumer prices rose by 0.7% in the third quarter and were thus below the estimated 0.9%.
The CPI was an improvement on the 0.5% decline in the second quarter.
The NZD/USD price is in a tight range as traders react to New Zealand’s third quarter inflation data. It is trading at 0.6667, slightly below yesterday’s high of 0.6690.
NZD/USD falls as consumer prices disappoint
New Zealand consumer prices rise
Consumer prices in New Zealand recovered in the third quarter as the country continued its recovery process. The Headline Consumer Price Index (CPI) rose to 0.7% in the quarter, pushing annual inflation down to 1.4%. The average estimate of the analysts surveyed by Reuters showed a quarter-on-quarter increase of 0.9% and a year-on-year increase of 1.7%.
According to Statistics New Zealand, the increase in inflation was mainly due to higher vegetable prices and higher rates. Vegetables increased due to scarcity and strong demand, especially from restaurants and cafes. The report stated:
“Since restaurants and cafes were closed during COVID alert levels 3 and 4 in April, many tomato growers delayed or reduced planting their crops during this period because they were not sure that demand would recover.
Meanwhile, the fees charged by city councils rose by 3.1%, the lowest annual increase in 20 years, while the price of gasoline rose by 1.7% due to an excise tax. In the same quarter, rents rose by only 0.5%, while domestic air fares increased by 5.7%, although business activity slowed down. In addition, prices for cell phones fell by 15%, after rising sharply in the first and second quarters.
New Zealand’s economy is on a recovery path, mainly due to the way the country has dealt with the pandemic. The country has confirmed only 5,000 Covid 19 cases and only 25 deaths. It has also managed to defeat the second wave of the virus without casualties.
At the same time, the government and the central bank have triggered the biggest impulse known so far. The central bank has cut interest rates to zero and launched its first program of quantitative easing. As part of this program, it will buy up bonds worth up to 100 billion dollars. The bank has also warned that it could be forced to introduce negative interest rates.
The government, on the other hand, is spending more than N$12.1 billion to support the economy. The funds are used for wage subsidies, strengthening the health sector and more support for the needy.
NZD/USD technical outlook
Technical Table NZD/USD
On the four-hour chart we can see that the NZD/USD price has dropped from yesterday’s high of 0.6690 to the current level of 0.6667. This price is slightly above the exponential moving 15-day and 25-day averages. It has also moved slightly below the first resistance level of the standard pivot points. Most importantly, the pair has moved below the important resistance level shown in green. Therefore, I suspect that the pair will continue to fall today as the bulls attempt to retest the pivot point at 0.6620.