NZD/USD: 0.6850 is key resistance, focus on China inflation figures

NZD/USD was better bid in the previous two trading days but struggled to find acceptance above 0.6850.
A weaker-than-expected China inflation data could boost stimulus bets and bode well for the NZD and other risk assets.

Omkar Godbole FXStreet Contributor

The NZD/USD pair is currently trading at 0.6829, having clocked a high of 0.6839 earlier today.

The Kiwi picked up a strong bid on Wednesday after the Reserve Bank of New Zealand, in an expected dovish shift, said that rates would remain at the current level of 1.75 percent through 2019 and 2020 and the next move could be up or down. The pair remained bid yesterday, as Trump's flexibility on tariff deadline raised hopes of a breakthrough trade deal between the US and China.

On both days, however, 0.6850 proved a tough nut to crack. As a result, it is the key level to watch out for today.

That China, the world's second largest economy, is slowing is generally accepted by now and the inflation data, especially the producer price index (factory-gate inflation), due at 01:30 GMT, is likely to confirm that.

A below forecast PPI could boost China stimulus bets. The People's Bank of China (PBOC) will have little room to stimulate the economy if the consumer price index (CPI) remains elevated.

The Kiwi may find acceptance above 0.6850 if both the CPI and PPI miss expectations, signaling that officials have room to increase stimulus to support the nation's slowing economy.

Technical Levels

1. R3 0.6927
2. R2 0.6892
3. R1 0.6863
PP 0.6827
1. S1 0.6799
2. S2 0.6763
3. S3 0.6734

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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