NZD/USD clings to CPI-led gains but remains capped at 50-DMA

The NZD/USD pair held on to higher-than-expected NZ CPI-led strong gains and reversed all of its previous session's losses, albeit has struggled to break through 50-day SMA hurdle near mid-0.7000s.

The pair caught fresh bids on Thursday after the latest NZ Consumer Price Index (CPI) report showed prices rose at their fastest annual pace in five- and-a-half years during the first quarter of 2017. The headline CPI recorded a q-o-q growth of 1%, lifting the yearly rate to 2.2%. The readings surpassed expectations and suggested that lower interest rates were fueling inflationary pressure in the economy. 

However, since majority of the lift in inflation was largely driven by a tax hike on alcoholic beverages and tobacco, analyst seemed convinced that the latest up-tick is unlikely to prompt any immediate RBNZ action and has failed to lift the pair further beyond near three-week highs touched in the previous session.

   •  RBNZ to maintain patience, leaving the cash rate at 1.75% through to May 2018 - TDS

Meanwhile, a softer tone surrounding the greenback, with the key US Dollar Index failing to build on overnight recovery gains, has helped the pair to maintain its bid tone near session tops around 0.7040-45 band. 

Next in focus would be the US economic docket, featuring the release of weekly jobless claims and Philly Fed Manufacturing Index, which would now be looked upon to grab some short-term trading opportunities. Also in focus would be the US Treasury Secretary Steven Mnuchin's scheduled speech, which has the potential to trigger a fresh bout of volatility in the FX market.

Technical levels to watch

On a sustained move beyond 0.7050 area (50-day SMA), the pair is likely to dart towards 100-day SMA hurdle near 0.7080 region. A follow through momentum beyond 100-day SMA barrier now seems to open room for continuation of the pair’s upward trajectory even beyond the 0.7100 handle towards the very important 200-day SMA strong resistance near 0.7135-40 region. 

On the flip side, retracement back below 0.7030 level might continue to find support near the 0.70 psychological mark, which if broken would negate any near-term bullish bias and turn the pair vulnerable to head back towards 0.6955-50 intermediate support, en-route 0.6910-0.6900 strong support. 

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