NZD/USD defends 23.6% Fib retracement despite the drop in the ANZ’s monthly inflation gauge

• The NZD/USD defended key support at 0.6726 (23.6% Fib R of 0.6424/0.6819) a few minutes before press time, despite the drop in the ANZ’s New Zealand monthly inflation gauge fell in October.
• The details of the ANZ’s report indicate that inflation is broadening.
• The gains could be limited by growing Fed-RBNZ policy divergence.

The NZD/USD pair is currently trading at 0.6736 – up 0.15 percent on the day – having clocked a low of 0.6723 earlier today.

The ANZ’s New Zealand Monthly Inflation Gauge fell 0.4% m/m (up 2.9% y/y) in October, kicking Q4 off on a softer note. The details of the report released a few minutes before press time, however, show that price pressures are broadening. That may have helped the Kiwi bounce off the 23.6% Fib retracement level of 0.6726.

The gains, however, could be limited or short-lived as the ANZ’s inflation data is unlikely to force the RBNZ to adopt a hawkish bias. The Fed, meanwhile, reaffirmed its tightening stance last week, setting the stage for a 25 basis point rate hike in December and three more rate hikes in 2019.

Simply put, the divergence between the Fed and the RBNZ is set to grow further. So, it seems safe to say that for the greenback, the path of least resistance is on the higher side.

Even so, the NZD/USD looks north on the daily chart, having witnessed a symmetrical triangle breakout on Nov. 1.  A break above 0.6819 (Nov. 7 high) would further bolster the already bullish technical setup.

NZD/USD Technical Levels