NZD/USD hits fresh multi-week lows under 0.6400 post-hot US CPI data, having earlier rejected the 21DMA

• NZD/USD slipped to fresh multi-week lows under 0.6400 on Friday after hot US CPI data.
• The annual rate of headline inflation hit a fresh four-decade high.
• In response, risk appetite soured, US yields rose and the buck strengthened as traders upped Fed tightening bets.

NZD/USD hit fresh multi-week lows under the 0.6400 level on Friday after a hotter-than-expected US Consumer Price Inflation report for May injected a dose of strength into the US dollar. The headline annual pace of inflation unexpectedly rose to 8.6% from 8.3%, marking a new four-decade high, while the annual pace of core inflation fell less than expected.

The data triggered a hawkish market reaction as traders rebuilt Fed tightening bets (having pared back on them recently in anticipation the data would show inflation in the US having “peaked”). US 2-year yields were last trading 10 bps higher on the session, a reflection of this.

Fed tightening fears are weighing on sentiment, with major US equity index futures coming under selling pressure in pre-market trade and risk sending NZD/USD from current levels in the 0.6380s, where the pair still trades flat on the day, into the red. From a technical standpoint, the fact that the pair tested its 21-Day Moving Average at 0.6440 earlier in the session but was rejected suggests a negative short-term trading bias. The door is open for a drop lower towards 0.6300.