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The New Zealand CPI (Consumer Price Index), which is released every quarter, measures the change in the price of goods and services charged to consumers. CPI readings which are higher than forecast tend to be bullish for the New Zealand dollar.

Here are all the details, and 5 possible outcomes for NZD/USD.

Published on Monday at 21:45 GMT.

Indicator Background

The CPI, also known as inflation, is important to currency traders, since if the index rises, the central bank will be inclined to raise interest rates in order to keep inflation under control. In turn, higher interest rates make theNew Zealand dollar more attractive to investors.

The previous CPI came in at 0.8%, which was close to the forecast of 1%. The forecast for October is for 0.8%, so the market does not foresee any significant change to the CPI.

Sentiments and levels

Although New Zealand’s economic indicators have been steady, the global slowdown and European debt crisis continue to be of great concern, and the business sentiment indicator dropped to a five-month low in September. The kiwi has struggled lately, and any bad economic news could push it down further. Thus, the overall sentiment is bearish on NZD/USD towards this release.

Technical levels, from top to bottom: 0.8505, 0.8410, 0.8330, 0.8275, 0.8180, and 0.8120.

5 Scenarios

  1. Within expectations: 0.6% to 1%. In this scenario, NZD/USD could show some slight fluctuation, but it is likely to remain within range,  without breaking any levels.
  2. Above expectations: 1.1% to 1.4%: A reading above expectations would be an indication  of greater inflation,  and could  push the pair  above one  resistance level.
  3. Well above expectations: Above 1.4%: An unexpectedly sharp rise in inflation would likely trigger higher interest rates, pushing NZD/USD upwards, and possibly breaking two or more lines of resistance.
  4. Below expectations: 0.2% to 0.5%: A lower than expected reading could pull the pair downwards, with one support level at risk.
  5. Well below expectations: Below 0.2%: Such a reading would hurt the kiwi, and the  pair could break two  support levels or more.

For more on NZD/USD, see the  New Zealand dollar forecast.

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