NZD/USD bulls keeping a watchful eye over price action and support structures

• NZD/USD bulls monitoring for a bullish trigger to target 0.69 the figure. 
• All eyes are turning towards the central banks and critical US data on Friday. 

NZD/USD is trading bid on the day and has rallied over 0.4% in the wake of renewed weakness in the US dollar. At the time of writing, NZD/USD is trading around 0.6813 and close to the session's high of 0.6818.

The pair rallied from a low of 0.6766. However, the bulls could be looking to take profit ahead of the close on the approach to the 0.6820 level. This could equate to a meanwhile correction ahead of the day's close, as illustrated below.

''Volatility remains elevated as the drip of news around Omicron continues,'' analysts at ANZ Bank explained. ''It’s too soon to be definitive around the impact of the variant, and this will make for choppy trading conditions for some time yet.''

US CPI eyed

Meanwhile, the central banks are coming back into focus as traders get set for the US Consumer Price Index this Friday.  ''We expect inflation to slow significantly as fiscal stimulus fades and supply constraints ease, but we don't expect the data to be validating in the near term,'' analysts at TD Securities said.

''The CPI likely surged in Nov, with a drop in oil coming too late to avert another large gain in gasoline and core prices boosted by rapidly rising used vehicle prices and post-Delta strengthening in airfares and lodging.''

The data will be important for traders as the monitor for an acceleration in the pace of tapering by the Federal Reserve, potentially to start as soon as this month. This is almost being treated as a foregone conclusion, analysts at ANZ Bank explained. 

''But a strong CPI number could ramp up expectations of a hike in Q2 next year. The Kiwi may soften on this, given the NZD rates curve may struggle to price in more, while other markets could move up in sync with Fed pricing.''

NZD/USD technical analysis

The price has rallied just shy of its daily ATR of around 60 pips within the day's range of 52 pips. This leaves the bias to the downside for a correction towards the old highs that meet the 50% retracement level near 0.68 the figure.

Should this area of support hold and lead to a subsequent drift higher, the bulls could well be encouraged to add or join the northerly trajectory for a higher high in the forthcoming sessions. 

From the daily chart's perspective, the price is meeting some resistance. This could lead to a bullish inverse head and shoulders should the vicinity of the 0.68 figure, (or as low as the 0.6770s) hold on a retest. In doing so, the bulls would be looking to test the late Sep lows of 0.6859/00 on a bullish breakout.