The New Zealand Dollar (NZD) extended downside movement against the US Dollar (USD) on Tuesday, dragging the price of NZD/USD to less than 0.8800 ahead of the inflation report. The sentiment remains bullish due to Higher High and Higher Low in the recent wave.
Technical Analysis
As of this writing, the pair is being traded near 0.8793. A hurdle may be noted around 0.8835, the swing high of the recent upside rally as demonstrated in the following chart. A break and daily closing above the 0.8835 resistance area could spur a renewed buying interest, validating a fresh rally towards the 0.8900 handle.
![nzdusd-d1-capital-trust-markets-2[2]](https://www.fxopen.com/blog/en/content/images/2014/07/nzdusd-d1-capital-trust-markets-22.png)
On the downside, the pair is expected to find a support around 0.8733, the 23.6% fib level ahead of 0.8670, the 38.2% fib level and then 0.8618, the 50% fib level. The sentiment will remain bullish as far as the 0.8402 support area is intact.
Consumer Price Index
The Statistics New Zealand is due to release the Consumer Price Index (CPI) report on Tuesday (today). According to the median projection of different economists, the CPI—a key yardstick for inflation—remained 1.8% in the second quarter as compared to 1.5% in the same quarter of the year before. Generally speaking, higher CPI is considered positive for the economy, hence a better than expected actual data will be seen as bullish for NZD/USD and vice versa.
Conclusion
The Reserve Bank of New Zealand (RBNZ) is very hawkish in its monetary policy stance due to steady growth and constantly rising inflation. The central bank is expected to continue further hikes in the benchmark interest rate which will consequently increase the price of Kiwi Dollar. So considering the overall technical and fundamental outlook, selling the pair around the current levels appears to be a good strategy, the trade should however be stopped out on a daily closing above the 0.8835 resistance area.
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