For the last one month, the pair has been largely caught in a bind in between its 100 (red line) and 200-day (blue line) moving averages. But after the softer NZ CPI data here, perhaps sellers are hoping to try and make a play to the downside and threaten a break below the 200-day moving average now.
Much like everywhere else, inflation is still running well above the RBNZ's target range but cooler price pressures are definitely a welcome development for the time being. The domestic economy is somewhat pressured and could already be staring down the barrel of a recession amid tighter financial conditions brought about by the central bank's rate hikes.
The OIS market continues to imply a 84% probability of a 25 bps rate hike by the RBNZ in May but that seems to be the limit in which traders expect the central bank to reach.
The RBNZ had forecast Q1 inflation to be at 7.3% on an annual basis and for that to slow to 6.6% in Q2. As such, the 6.7% reading seen earlier today for Q1 is very much helping to pump the brakes on any further aggression in the tightening cycle at least.
Going back to NZD/USD, a firm break below the 200-day moving average at 0.6160 will allow sellers to explore a push towards the March lows near 0.6100 next.
