NZDUSD retreats from seven-week high towards 0.5900 despite upbeat RBNZ Inflation Expectations

• NZDUSD pares recent gains as bulls step back from 1.5-month high, snaps two-day uptrend.
• RBNZ Inflation Expectations improved to 3.62% for two-year, 5.08% for one year.
• Sour sentiment, China’s covid woes exert downside pressure on prices.
• Lackluster moves expected ahead of US CPI, risk-aversion may help please bears.

NZDUSD bulls take a breather at the multi-day high during a sluggish Tuesday morning in Europe. With this, the Kiwi pair remains mildly offered near 0.5930 after rising to the highest levels since September 20, snapping a two-day uptrend.

In doing so, the quote fails to justify the strong points of the Reserve Bank of New Zealand’s (RBNZ) Inflation Expectations for the fourth quarter (Q4). That said, the RBNZ one-year inflation expectations rose from 4.86% to 5.08% QoQ whereas the more closely watched two-year counterpart increased to 3.62% compared to 36.07% marked in the third quarter (Q3).

A lack of major data/events and recently firmer covid numbers from China dim the market’s previous optimism, which in turn allowed the US dollar to lick its wounds during an inactive session.

China reported the biggest jump in the fresh daily coronavirus numbers since April, which in turn justifies the dragon nation’s previous defense of the zero-covid policy.

Elsewhere, indecision over the US Federal Reserve’s (Fed) next move and the cautious mood ahead of the US Consumer Price Index (CPI) for October, as well as the US mid-term election, also underpin the US dollar’s corrective bounce.

Amid these plays, the US Treasury yields are firmer and stock futures remain indecisive but the US Dollar Index (DXY) rebounds from a one-week low.

Moving on, NZDUSD may witness further pullback but the bullish chart pattern and expectations of easy inflation might defend the pair buyers.

Technical analysis

A one-month-old ascending trend channel keeps NZDUSD buyers hopeful between 0.6000 and 0.6220.