NZD/USD stumbles below 0.6400 ahead of US CPI data, and Fed’s decision

• US Dollar gained against the New Zealand Dollar as traders brace for the US CPI report.
• Inflation expectations reported by the New York Fed showed people estimate inflation will cool down.
• New Zealand housing data further deteriorated due to increased borrowing costs.

The New Zealand Dollar (NZD) drops against the US Dollar (USD) amidst a risk-on impulse and also a buoyant US Dollar. Data revealed in the US showed that inflation expectations continued to ease ahead of Tuesday’s US Consumer Price Index (CPI) report. At the time of writing, the NZD/USD is trading at 0.6382 after hitting a daily high of 0.6421.

NZD/USD falls ahead of November’s US CPI report

Wall Street finished on a higher note before the release of inflation data in the United States (US). The NZD/USD is expected to remain subdued as market analysts carefully watch the upcoming US Consumer Price Index (CPI) release. It is estimated to show a slight dip from previous levels – YoY readings should decrease from 7.7% to an estimated 7.3%, while Core CPI may drop slightly from 6.3% to 6%. A fall in CPI would be a tailwind for the NZD/USD pair after the release of the latest Reserve Bank of New Zealand (RBNZ) Monetary Policy Statement (MPS).

Elsewhere, American households predicted their inflation rate in the year ahead to be at its lowest since August 2021. According to a November report from the Federal Reserve Bank of New York’s monthly Survey of Consumer Expectations, this was an estimated 5.2%, down significantly from October’s prediction of 5.7%. Longer-term forecasts for inflation over three and five years also decreased compared with previous months’ expectations

In the meantime, the REINZ Housing data report revealed that the housing market had seen a troubling trend, with prices falling significantly from their peak last November. Unsurprisingly this has been attributed to the RBNZ MPS back in November, and while there is still uncertainty about how far home values may drop, it is estimated that they could fall by around 22%.

NZD/USD Price Analysis: Technical outlook

The NZD/USD daily chart suggests the pair is neutral-biased, though a positive inflation report could pave the way for a break above 0.6400 and then above the August 12 daily high of 0.6421. Once cleared, the NZD/USD bias would shift upwards, with the next resistance at around the June 3 swing high at 0.6575. As an alternate scenario, the NZD/USD first support would be the psychological 0.6300. A breach of the latter will expose the  20-day Exponential Moving Average (EMA) at 0.6287, followed by the 200-day EMA at 0.6240.