Nzdusd rises as US inflation eases and budget deficit widens

NZDUSD Analysis

Performance after Thursday
Period	Pct	Chg	Momentum
Thursday	0.19%	10.9 Pips
Week to-date	0.53%	30.2 Pips
March	2.51%	140.3 Pips

Upcoming key events (London Time)

Fri 02:00 PM USD Index of Consumer Sentiment

What happened lately

In the United States, several economic indicators showed signs of deceleration in February. The Producer Price Index (PPI) excluding Food and Energy sectors declined by 0.1% for the month compared to a 0.5% increase in January. Additionally, the 12-month PPI rate, excluding these sectors, decreased to 3.4% from 3.8% in January, far below the market expectations. The headline PPI also remained flat, dropping from a previously revised 0.6% in January to 0% in February. On the consumer side, the Consumer Price Index (CPI) inflation rate fell to 2.8% over a 12-month span, declining from 3% in January. The monthly CPI excluding Food and Energy decreased to 0.2%, down from the previous month’s 0.4%. Moreover, the U.S Monthly Treasury Budget Statement worsened in February to a deficit of -$307 billion compared to -$129 billion in January.

The improving U.S. labor market was highlighted by the slight decline in initial unemployment claims to 220k, a marginal improvement from the previous 221k. This ongoing strength in employment is crucial for any sustained economic recovery. Looking ahead, the upcoming release of the USD Index of Consumer Sentiment is pivotal, as consumer outlooks greatly influence economic activities.

For the NZDUSD currency pair, the recent economic news will likely provide modest support. The noticeable decrease in U.S. inflation and the downturn in the PPI indicates less pricing pressure in the economy, potentially reducing the likelihood of aggressive monetary policy tightening by the Federal Reserve. This can lead to a more dovish stance which would pressure the U.S. dollar, possibly offering support to the New Zealand dollar. Moreover, a softer U.S. economy, reflected in the wider budget deficit and declining inflation numbers, might not bode well for the dollar, giving some strength to the NZDUSD pair. Nonetheless, the outlook is slightly cautious, pending the results of the upcoming Consumer Sentiment data which holds significant weight in economic forecasting.

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What can we expect from NZDUSD today?

NZDUSD on Thursday rose 0.19% to 0.57400. Price is above 9-Day EMA while Stochastic is rising.

Updated daily direction for NZDUSD looks bullish as the pair ended higher after Thursday trading session.

Looking ahead for the day, immediate upside resistance level is R1 at 0.57446 with break above could target R2 at 0.57493 or figure level area. While towards the downside, we are looking at daily low of 0.57281 as an important support. Break below this level could weaken the current bullish momentum. A break above 0.57410 may suggest continuation after recent positive movement.

For the week to-date, take note that NZDUSD is mixed as compared to the prior week.

Key levels to watch out:

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