NZD/USD: bears looking for a discount towards R2 before retargeting S3 and channel support

• NZD/USD was pretty much at a standstill on Monday, drifting from the European session lows at 0.6433 and went on to make a session high of 0.6454.
• The dollar gave some ground back following a surge up from 95.78, just above trendline support, (95.70), to test the 96 handle, only to drop back to break European lows and close at 97.72.  

“This cross will continue to be buffeted by global risk appetites and we expect support levels will be tested if sentiment deteriorates further in the short term. We maintain a medium-term downward bias,” analysts at ANZ Bank explained.  

For the day ahead, we have the ANZ Truckometer and ANZ Monthly Inflation Gauge, along with the Government’s Financial Statements for the year ended June. However, the real action is likely to come from Chinese market performance and the CNH that met a fresh cycle low yesterday down at 6.9373 vs the greenback. However, the pair was rejected there and scaled back to test R2 prior resistance at 6.9184. The Chinese markets were a sea of red yesterday and there needs to be a stark recovery if risk sentiment is going to improve in EM’s and subsequently, for the proxy antipodes. From the calendar, eyes will focus on US CPI later on this week.  

US CPI snapshot preview:

Analysts at Nomura forecast 0.2% (0.244%) m-o-m increase in core CPI inflation for September following a 0.082% advance in August. On a 12-month change basis, our
forecast would be equivalent to 2.304% advance in September, up slightly from a 2.190% pace in August. The relative softness in core CPI inflation in August was mostly concentrated certain volatile core goods prices.  

NZD/USD levels

Support 0.6350 – Resistance 0.6480  

NZD/USD is deeply into the bear’s layer testing 0.6420’s with S1 at 0.6419 and S2 at 0.6399. S3 is located at 0.6365. However, RSI has headed higher away from oversold territory having been travelling sideways since mid last week around 19/20 in the 4hr time frame and is now up to 36 within a northerly trajectory. For the meanwhile, the price consolidates around the pivot in what looks to the end of a steep decline judging by the price action emphasised with a daily and weekly bullish daily spinning top. the monthly charts are more indicative of a continuation, with RSI headed south towards 30 with chars n a sea of red and no obvious indication of any let-up. A breach of R1 opens R2 at 0.6506 where the price may struggle to overcome if the dominant trend is to prevail and target S3 at 0.6365 and the bottom of the descending daily channel.