NZD/USD steady ahead of NZ inflation

NZD/USD has moved slightly upwards on Thursday. In the North American session, NZD/USD is trading at 0.6662, up 0.14% on the day. The pair registered sharp gains on Wednesday, climbing 1.1% as the US dollar sustained broad losses as fiscal stimulus talks remained deadlocked.

Investors eye NZ inflation

New Zealand will release consumer inflation for Q3 later on Thursday. Since inflation is released on a quarterly, rather than a monthly basis, each release could have a magnified impact on NZD/USD. The consensus is that inflation will post a solid gain of 0.9%, after a shocking decline of -0.5% in the second quarter. It marked the first quarterly decline since January 2016, reflecting the sharp economic downturn due to the Covid-19 pandemic. New Zealand has reported only 25 deaths from Covid-19, but the economy has been hit hard by the ensuing lockdown as well as curtailed global demand for New Zealand exports.

Recent economic numbers have been a mix, but September retail sales and PMI reports pointed upwards. Electronic Retail Sales, which rose 5.4%, and the Business NZ PMI, which accelerated from 50.7 to 54.0 points. A strong CPI release would point to a deepening recovery and would be bullish for the New Zealand dollar.

US stimulus talks at a standstill

The financial markets have been anxiously following the latest developments with regard to a US fiscal stimulus agreement. However, the prospect of a deal between the Democrats and Republicans are dimming, and even if a deal were to be magically clinched today, the package would not be implemented until after the election. President Trump would love to wave a new fiscal agreement at his supporters and critics ahead of the election, but Republicans senators are worried above saving their own jobs, and a massive spending package will not win many votes among conservative voters. Bottom line? Unless there is a shocking change of heart amongst Republican senators, the fiscal package is unlikely to materialize. A no-deal scenario could be good news for the US dollar, as investors could respond cautiously and stick with the safe-haven dollar.

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NZD/USD Technical

• There is resistance at 0.6697. The next resistance line is at 0.6739
• There is support at 0.6594, protecting the 0.65 line. This is followed by support at 0.6533
• NZD/USD broke above the 20-day MA line on Wednesday, which indicates an upward trend

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