NZD/USD burst into life to test the mid 0.70 area

At the time of writing, NZD/USD is trading at 0.7043 and higher by some 0.55% on the day as Wall Street draws to a close. 

The kiwi moved from a low of 0.6991 to a high of 0.7061 as the greenback fell on the back of a disappointment in the US Consumer Price Index. 

The dollar index DXY, which measures the greenback against a basket of other major currencies, was down 0.19% at 92.888 and near to the lows of 92.801 by the closing bell.

Earlier, it hit 93.195, the highest since April 1, and not far off of its 2021 high of 93.439.

The consumer price index increased 0.5% last month after climbing 0.9% in June, the Labor Department said.

In the 12 months through July, the CPI advanced 5.4%. Excluding the volatile food and energy components, the CPI rose 0.3% after increasing 0.9% in June.

Economists polled by Reuters had forecast overall CPI would rise 0.5% and core CPI 0.4%.

The Kiwi moved sharply higher overnight following the release of the US CPI data, which saw core prices rise slightly less quickly than expected. This resulted in broad-based USD weakness, although Kiwi was a clear outperformer in this move. ''Ultimately the CPI data reinforces the Fed’s view that the increase in inflation is transitory,'' analysts at ANZ Bank said.

''Meanwhile, rates markets are showing increasing expectations for what the Reserve Bank of New Zealand will do next week with more than 25bp of hikes priced in now.''

NZD/USD technical analysis

In the prior day's analysis, it was stated that from a daily perspective, ''the bird is bottoming and bulls are in anticipation of a break of 4-hour resistance structure for an opportunity to target a restest of daily resistance.''

The price has indeed moved higher as follows:

Prior analysis, daily chart

Prior analysis, 4-hour chart

From a bullish 4-hour perspective, the price will need to break 4-hour resistance, as illustrated above. 

On a retest of the support stricture, the price would potentially hold and rally deeper into resistance territory. 

Live market analysis

4-hour chart

As illustrated, the price action was according to plan and resulted in an upside advance towards resistance territory. 

For the sessions ahead, traders will position accordingly to the US CPI data which could leave the greenback vulnerable to the downside and keep the commodity complex and the bird elevated, albeit within the daily resistance zone.