The New Zealand dollar continues to find itself under pressure after the recent CPI reading came out weaker than expected for the previous quarter, as it slipped in at a weaker 0.4% (0.5% exp). This was all together much higher than the previous quarter, but the market expectations were for heating in the economy and this weaker result will lead to the Reserve Bank of New Zealand looking to sit on its hands a little bit longer. Addtionally, the RBNZ came out today regarding housing restrictions as a whole for the country around property speculation from investors. This is likely to cause some sort of correction in the market, and I anticpate we could see this flow on to the NZ economy as the wealth starts to trickle out of the property market and into other areas of the economy. Regardless other developed nations will be watching this closely and the market will also be wondering exactly how it will all pan out.
On the charts the NZDUSD has been a high flyer and going against the grain lately which has been all about the bull market. It has however got into in trouble around the 72 cent mark and has slowly been edging back down the chart as the market continues to take profit and feed of the recent economic results. Support at 0.7046 has so far held back any further falls and if see a push through here I would expect to see it fall further to 0.6916 on the whole. The 50 day moving average much also provide some dynamic support, but at these levels and it edging so close I would expect the market to brush past it as the NZDUSD looked to fall further.
The other elephant in the room continues to be the US market which has so far found itself under pressure from global traders who continue to believe that the FED will likely have to pause lifting interest rates any further with the level of global economy uncertainty we are seeing. This comes on the back of better than expected economic results from last week, as retail sales m/m lifted to 0.6% and industrial production lifted to 0.6%. A very strong result overall, but still not enough to convince the current market the dovish FED that previously dominated markets will not come back into the frame after recent global developments.
The S&P 500 has been the large benefactor of all of this betting that the FED will look to hold interest rates further. It has so far climbed up the charts but on the H1 it has formed a pennant/flag pattern and is looking to break out higher. For me this is an opportunity and investors will be looking to break out higher on the charts if they can. Resistance remains at 2167 and any market jump will look to put pressure on this level before the end of day and try and close above to enable momentum to carry forward.