NZD/USD bulls flirt with 0.5700 amid steady DXY, hawkish bias for RBNZ

• NZD/USD prints mild gains during three-day uptrend, sidelined of late.
• Firmer NZ Q3 inflation propels hopes of RBNZ’s another 0.75% rate hike in November.
• DXY battles risk-on mood amid hawkish Fedspeak, sluggish yields.
• Second-tier US data, risk catalysts may help revive US dollar.

NZD/USD bulls struggle to keep the reins on early Wednesday, printing mild gains around 0.5700 during the three-day uptrend. In doing so, the Kiwi pair portrays the market’s sluggish performance amid the inactive US Dollar Index (DXY) and the risk-on mood. However, the hawkish bias for the Reserve Bank of New Zealand’s (RBNZ) next move keeps the pair buyers hopeful.

Multiple banks raised bullish forecasts for the RBNZ’s next move after witnessing strong prints of New Zealand’s (NZ) third quarter (Q3) Consumer Price Index (CPI).

That said, NZ Q3 CPI rose to 2.2% compared to the 1.6% market forecast and 1.7% prior. The details also mentioned that the YoY CPI increased to 7.2% versus the 6.6% expected and 7.3% prior. Considering the data, the Australia and New Zealand Banking Group (ANZ) said, “With inflation looking increasingly entrenched, and core inflation showing no signs of rounding a corner, the RBNZ will need to respond. We now expect back-to-back 75 basis point hikes in November and February, taking the OCR to 5%.”

Elsewhere, the risk-on mood also underpins the NZD/USD upside. While portraying the sentiment, the S&P 500 Futures rise 0.80% intraday, tracking Wall Street’s second daily gain, whereas the US Dollar Index (DXY) remains sidelined near 112.00 at the latest while the US 10-year Treasury yields seesaw near 4.0% mark.

Headlines suggesting the Russian soldiers’ struggle in Ukraine and UK Chancellor Jeremy Hunt’s ability to ward off the recession woes seem to propel the market’s optimism of late.

It should be noted that the DXY fails to capitalize on the firmer industrial production, as well as the hawkish Fedspeak, amid the risk-on mood and sluggish Treasury yields. Recently, Minneapolis Federal Reserve Bank President Neel Kashkari said, “Until I see some compelling evidence that core inflation has at least peaked, not ready to declare a pause in rate hikes.”

Moving on, the second-tier US data, relating to housing, will join the multiple Fed speakers to entertain NZD/USD traders. That said, the Kiwi pair is likely to remain firmer unless any risk-negative surprises, as well as the RBNZ’s unexpected announcements, land on the desk.

Also read: Where inflation stands and what to expect, overview of 8 major currencies

Technical analysis

NZD/USD’s first daily closing beyond the 21-DMA, at 0.5680 now, in two months keeps buyers hopeful to renew monthly high, around 0.5815 by the press time.