NZD/USD pares intraday gains near 0.6270 support as traders reassess NZ inflation, US Dollar edges higher

• NZD/USD consolidates post-NZ inflation gains amid mixed sentiment, US Dollar’s corrective bounce.
• NZ Q2 CPI came in better than forecast but defends RBNZ status quo with softer outcome.
• Risk profile remains sluggish after optimism about US banks bolstered sentiment the previous day.
• US Dollar cheers upbeat details of Retail Sales but Fed concerns prod greenback buyers.

NZD/USD trims the first daily gains in four around 0.6285 amid Wednesday’s mid-Asian session, following a quick run-up to 0.6334 marked earlier in the day.

That said, the Kiwi pair’s latest weakness could be linked to the US Dollar’s ability to defend the previous day’s corrective bounce off the multi-month low, as well as sluggish markets. However, the better-than-forecast inflation data from New Zealand (NZ) put a floor under the Kiwi pair.

New Zealand’s (NZ) headline inflation, per the Consumer Price Index (CPI), edges lower to 1.1% QoQ and 6.0% YoY for the second quarter (Q2) of 2023 versus 1.2% and 6.7% respective priors. In doing so, the NZ data justifies the market’s cautious mood about the Reserve Bank of New Zealand’s (RBNZ) pause in the rate hike trajectory marked the last week.

It’s worth noting that the welcome details of the US Core Retail Sales for June underpinned the DXY’s recovery from the lowest level since April 2022. However, the risk-on mood and chatters about the US Federal Reserve’s (Fed) policy pivot prod the US Dollar bulls amid an absence of major data/events, which in turn weigh on the NZD/USD price.

The risk appetite improves on the positive performance of the US banks, as well as the risk-positive headlines surrounding China, which in turn allowed the Wall Street benchmarks to refresh the yearly top. The same joins the latest Reuters poll of around 109 economists suggesting that the Fed’s widely anticipated 25 basis points (bps) rate hike in July will be the last increase of the current tightening cycle, to propel the NZD/USD price.

In the case of the US data, the Retail Sales growth for June came in as 0.2% MoM versus 0.5% expected and prior (revised). However, the Retail Sales Control Group marked 0.6% growth versus market forecasts of -0.3% and 0.3% previous readings. It should be noted that the US Industrial Production reprinted -0.5% for June compared to analysts’ estimations of 0.0%.

Amid these plays, the US Dollar Index (DXY) edges higher around 100.00, after bouncing off 99.56 the previous day, whereas the S&P500 Futures and yields appear indecisive at the latest.

Given the lack of major data/events, as well as headlines suggesting China's Foreign Minister’s defense of geopolitical bias toward the US, the NZD/USD pair traders should keep their eyes on the risk catalysts for clear directions.

Technical analysis

A three-week-old ascending trend line joins 10-DMA to highlight 0.6270 as a short-term key support confluence for the NZD/USD bears to watch.