- NZD/USD faced rejection at 0.6658 a few minutes ago and now trades below key SMA.
- New Zealand's third-quarter inflation expectations data is due at 3:00 GMT.
- NZD may face selling pressure if inflation expectations drop.
NZD/USD is sidelined just below the 200-hour simple moving average at 0.6647 in Asia having printed a high of 0.6674 on Wednesday. The pair reached a multi-month high of 0.6716 on July 31 and witnessed a minor pullback to 0.6575 on Aug. 3 before regaining some composure.
Focus on New Zealand data
The inflation expectations released by the Reserve Bank of New Zealand measure business managers’ expectations of the annual consumer price index two years from now.
An increase in expectations is regarded as inflationary and often puts pressure on the central bank to adopt a hawkish stance. As such, an uptick in inflation expectations usually strengthens the bid tone around the domestic currency,
Inflation expectations were 1.24% in the second quarter. If the third-quarter number remains near the lower boundary of the RBNZ’s 1%-3% target range, expectations for additional central bank stimulus may rise, yielding a decline in the NZD/USD pair. Alternatively, a big rise will likely strengthen the bid tone around the NZD.
Apart from the data, the Kiwi is likely to take cues from newsflow related to Sino-US tensions and the action in the equity markets. Take note that the US Congress is still struggling to approve an additional coronavirus fiscal package. A continued deadlock could weaken the risk sentiment, putting a haven bid under the US dollar.
Technical levels
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