NZD/USD Price Forecast: Eyes break above 0.5640-0.5645 confluence ahead of US CPI
- NZD/USD attracts some follow-through buyers as Iran diplomacy hopes weigh on the USD.
- Traders, however, seem hesitant and opt to wait for the release of the US inflation figures.
- The constructive technical setup backs the case for a breakout through a confluence hurdle.
The NZD/USD pair turns positive for the second straight day on Tuesday, trading around the 0.5635 region during the early European session and looking to build on the previous day's strong recovery from April 2025 lows, touched last week. Traders, however, seem hesitant and await the release of the latest US consumer inflation figures before placing fresh directional bets.
The crucial US Consumer Price Index (CPI) report will be looked at for more cues about the Federal Reserve's (Fed) future policy path, which, in turn, will play a key role in influencing the US Dollar (USD) and provide a fresh impetus to the NZD/USD pair. In the meantime, hopes for Iran diplomacy counter December Fed hike bets and undermine the safe-haven buck, though the Reserve Bank of New Zealand's (RBNZ) dovish tilt keeps a lid on any meaningful upside for the Kiwi.
From a technical perspective, the NZD/USD pair trades beneath a tight cluster of resistance near the 0.5640-0.5645 area – comprising the 100-period Simple Moving Average (SMA) on the 4-hour chart and the 61.8% Fibonacci retracement, which forms a nearby ceiling. Meanwhile, momentum indicators are constructive, with the Relative Strength Index hovering around 61 and the Moving Average Convergence Divergence (MACD) line in positive territory and rising.
The broader setup, in turn, hints that buyers retain some control but still need to clear overhead barriers to reassert a clearer bullish trend. The next relevant hurdle is aligned at the 78.6% level around 0.5673 and the recent high area near 0.5712. A sustained break above this stacked band would be seen as a fresh trigger for bulls and pave the way for further gains.
On the downside, initial support emerges at the 50.0% Fibo. level around 0.5620, followed by the 38.2% retracement near 0.5599, which together define a short-term demand zone. A deeper pullback would expose the 23.6% retracement at 0.5572, ahead of the swing low anchor near 0.5528.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
NZD/USD 4-hour chart
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
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