FX.co ★ Blackpink | NZD/USD

The New Zealand Dollar is rebounding against the US Dollar on expectations of the highly anticipated US Consumer Price Index data due out today. The NZD/USD pair fell sharply after the US PPI numbers were released yesterday, dropping below the 0.5830 support level to 0.5790. The pair has risen over 0.50% today and is testing the previous support level of 0.5830, which now acts as resistance. Based on preliminary responses, the level appears to be holding for now, with price oscillating back up to 0.5822 at the time of writing. The New Zealand Dollar is one of the strongest-performing currencies in the market today, but no domestic trigger has caused this performance. The rally is likely driven more by positioning and profit-taking ahead of the US CPI report than by a change in the NZD outlook. Negative sentiment has not been dispelled. The conflict between the US and Iran still threatens global energy supplies, and oil is trading above $100 per barrel. But news of potential diplomatic talks has helped sentiment improve slightly today. The Reserve Bank of New Zealand raised the Official Cash Rate by 25 basis points to 2.75%. Still, the move's impact on the currency is negligible, as the Bank prefers to withdraw monetary easing gradually. Meanwhile, the US dollar still gains on hopes of a further rate hike on September 16 by the Federal Reserve. Market pricing currently puts the probability of such an action at almost 70%. The recent price action in the NZD seems to be part of positioning before the release of US CPI. Sellers may aim to push the price lower from resistance at 0.5830 or the bearish trend line at 0.5845, especially if the recent rebound continues in that direction. The base-case scenario for NZD/USD remains lower, as negative market sentiment continues to weigh on NZD as a high-beta currency, and the RBNZ's hawkish tone provided limited support after its latest rate hike. Meanwhile, prospects of a Fed rate hike in September support USD. US CPI growth is forecast at 0.4% month on month, and core inflation stands at 0.2%. A stronger-than-expected outcome will strengthen the case for a September rate hike and push back sellers. A rejection at 0.5830 or 0.5845 following the release will preserve the current bearish pattern and set the stage for a move to the prior support level of 0.5790. For an upside scenario, CPI must miss significantly to convince investors that the Fed can ignore the inflationary threat due to high oil prices and keep rates unchanged. In that case, and with the chances of a September rate hike dropping, the NZD/USD pair may break above the bearish trendline of 0.5845 in the short termshort term. However, geopolitical risks could prevent a recovery, as the New Zealand Dollar weakens in times of risk aversion. If CPI readings align with forecasts, the pair will remain within its existing bearish setup. Geopolitical risks, dovish commentary from the RBNZ, and expectations of a Fed hike in September would keep sellers in charge. The first resistance level is 0.5830, while the next is the bearish trend line at 0.5845. If the price closes below 0.5790, the sellers' dominance will be confirmed.