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NZDUSD Market Update

8/12/2022 3:08 PM

After consolidation of the price above the level of 0.6385 this week, the NZD/USD pair has a high potential for continuing upward dynamics, as bidders are actively selling off the USD after the publication of inflation data.

Thus, the consumer price index in annual terms for July amounted to 8.5%, which was lower than the projected 8.7% and the previous value at 9.1%, while the monthly indicator remained at the same level of 0.0%, which was lower than the expected 0.2% and the June value of 1.3%. Statistics have become a catalyst for active sales of the US currency, as a decrease in inflation reduces pressure on the US Fed, which may lead to an adjustment of monetary policy and an increase in the interest rate by 50.0 basis points, and not by 75.0 points, as previously expected.

In turn, in New Zealand, we can note an increase in the index of business activity in the manufacturing sector in July to 52.7 points from 50.0 points, as well as an increase in the food price index, which last month added 2.1% after an increase of 1.2%. At the same time, inflation expectations in the country are declining: in the next two years, an average value of 3.1% is projected (the previous figure was 3.3%). This proves that the Reserve Bank of New Zealand (RBNZ) is moving in the right direction in choosing the vector of monetary policy and restraining high rates of consumer price growth.

Against this background, the NZD/USD pair is likely to continue the upward trend of trading with a target at the June high of 0.6570 in the long term.

The long-term trend has changed to an upward one. The key support level of 0.6385 was broken out by the bidders, and now the growth target is at 0.6570. The nearest level from which it is worth considering long positions is shifting to the area of 0.6336.

As part of the mid–term uptrend, today the NZD/USD pair has reached the target zone 3 (0.6481–0.6467), in case of a breakout of which the growth will continue to the area of 0.6621-0.6607. If the target zone 3 is held by sellers, then a correction will begin to the area of key trend support 0.6328–0.6314.

Resistance levels: 0.6570, 0.6805. | Support levels: 0.6336, 0.6205.

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