NZD/USD takes breather from parabolic rally, but plenty to be bullish for

• NZD/USD bulls are moving in on critical hourly resistance.
• There are bullish fundamentals at play, but the rally is overextended, relative to historic price action. 

NZD/USD has fallen from the highs of the experiential rally that .started on Oct 13 as the greenback started to tail off before the more recent catalyst in New Zealand's inflation data. At the time of writing, NZD/USD is trading at 0.7150 and flat ahead of the Tokyo open and fix that could kick start some price action in Asia today. 

''The Kiwi is around 80bps higher than it was 24hrs ago, having benefited from a combination of USD weakness and its own credentials, with good performance seen on most crosses,'' analysts at ANZ Bank noted.

Earlier in the week, New Zealand's Consumer Price Index (CPI) was reported to have risen 2.2% in the third quarter, beating expectations and surging at the fastest pace in over a decade driven by housing-related costs and other supply constraints, data released on Monday showed.

Statistics New Zealand said in a statement. CPI rose 2.2% in the quarter ending September from a rise of 1.3% in the second quarter, the biggest quarterly movement since a 2.3% rise in the December 2010 quarter. Annual inflation surged 4.9% compared to a rise of 3.3% in the previous quarter, also the biggest annual movement in more than a decade.

The data beat analysts' expectations in a Reuters poll and forecasts of the Reserve Bank of New Zealand (RBNZ), both of which put the quarterly inflation rise at 1.4%, lifting annual inflation to 4.1%.

''While the reaction seems delayed and had been haphazard, the sharp move higher in short-end interest rates looks to now be impacting. Yesterday we changed our OCR call; we now expect six more hikes – one at each meeting between now and August, taking the OCR to 2%,'' analysts at ANZ Bank said, adding:

''Perhaps more importantly, we have also lifted our inflation forecasts. In an environment of still well-anchored inflation expectations, that speaks to the RBNZ being ahead of the pack and cyclically higher rates, which should benefit the NZD.''

NZD/USD technical analysis

• NZD/USD Price Analysis: Countertrend traders to eye 0.7050

''The 38.2% Fibonacci channel between Wi and Wii offers a target area between 0.7080 and 0.7050 as the closest round numbers, the latter being aligned to the weekly counter trendline.''

From an hourly perspective, however, the price is moving in on the M-formation as follows:

The price is making a 38.2% retracement to the neckline that would be expected to hold. This could lead to a downside 1-hour bearish impulse in the sessions ahead. If it breaks the neckline, then there will be prospects of some consolidation and a potential upside continuation from the newly formed bullish structure in coming sessions.