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The release of inflation expectations is the highlight of this week’s kiwi indicators. Here’s an outlook for the kiwi in the upcoming week.

NZD/USD chart with support and resistance lines marked. Click to enlarge:

nzd usd forecast

On one hand, producer prices rose more than expected, boosting the kiwi on expectations for fresh rate hikes. On the other hand, the global slowdown, led by Ben Bernanke, reduced the demand for “high risk” currencies such as the New Zealand dollar. The result – NZD/USD eventually closed the week very closed to where it ended the previous one. Let’ see what’s up now:

  1. Inflation Expectations: Published on Tuesday at 3:00 GMT. Expectations for inflation often turn into real inflation. This is an indicator for future rate moves, and is of high importance due to the frequency of the release – only once a quarter. Expectations have risen gradually in the past year, from 2.3% to 2.8% in Q1. Q2 will probably see stability.

NZD/USD Technical Analysis

The kiwi enjoyed the risk rally at the beginning of the week and it made move from the support line of 0.70 (mentioned in last week’s outlook) through the 0.7160 and up to 0.72 before bouncing back down all the way.

Like last week, the pair is bound between the round number of 0.70 and 0.7160 which temporarily held the pair in the past week, and also beforehand.

Below, 0.69 is the next support line. It  previously  worked as a line of resistance in May, after the pair fell down sharply.

Lower, 0.6790 that was a swing low in mid-July and also held NZD/USD in February is the next support line. Below, 0.6685 worked as support back in September and was a pivotal line in July. The final line for now is the year-to-date low of 0.6560.

Above, 0.7160 provides minor resistance, and its followed by 0.72 that worked as support quite recently. Higher, 0.7325 that was an area of struggle and also a peak in May is the next line of resistance, followed by the 0.7440 region, which capped the pair when it traded higher.

I remain bearish on NZD/USD.

After the disappointing quarterly employment data, the kiwi is more vulnerable than others to the  gloomy market mood.

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