NZD/USD drops back towards 0.6100 despite RBNZ rate hike, US inflation eyed

• NZD/USD fades the previous day’s corrective pullback from 26-month low.
• RBNZ matches market expectations of lifting the benchmark rates to 2.5% from 2.0%.
• RBNZ Rate Statement appears to have played its role by marking growth fears.
• US CPI for June will be an important event, risk catalysts are crucial too.

NZD/USD takes offers to renew intraday low around 0.6112 even as the Reserve Bank of New Zealand (RBNZ) announced the 0.50% rate hike on Wednesday.

The reason for the Kiwi pair’s pullback could be linked to the RBNZ Rate Statement. As per Reuters updates, the RBNZ Rate Statement mentioned, “Committee noted that while there are near-term upside risks to consumer price inflation, there are also medium-term downside risks to economic activity.”

Other the RBNZ-led moves, the NZD/USD prices previously cheered the market’s cautious optimism ahead of the key US Consumer Price Index (CPI) for June, expected to rise to 8.8% YoY from 8.6%. The reason for the mildly positive sentiment could be linked to the upbeat White House (WH) statement and softer US data.

“The US economic data, including the June jobs report, are not consistent with a recession in the first or second quarters,” the White House said in a memo released on Tuesday, as reported by Reuters. The news contributed to the market’s profit booking moves ahead of the key data/events. Further, the US NFIB Business Optimism Index for June slumped to the lowest since early 2013 while flashing 89.5 figures versus 93.1 prior.

Additionally, chatters that the latest jump in Shanghai’s covid numbers was inside the quarantine area and was well expected also likely to have favored the NZD/USD rebound during the early Asian session.

Amid these plays, S&P 500 Futures and the US 10-year Treasury yields both snap a two-day downtrend by the press time, even if flashing mild gains of late.

Moving on, NZD/USD traders should pay attention to the US inflation data as strong inflation could increase the odds of a faster Fed rate hike and weigh on the quote. However, any negative surprise could help the pair buyers to extend the latest corrective pullback from the yearly low.

Technical analysis

MACD and RSI (14) appear less favorable to the NZD/USD bears. However, downward sloping support lines from June 22 and January 27 coincide at 0.6025 to make it the key support. Alternatively, the 10-DMA level surrounding 0.6170 precedes a three-week-old resistance line, close to 0.6180 at the latest, to restrict short-term NZD/USD upside.