The Reserve Bank of New Zealand’s Consumer Price Index (CPI) is closely watched by New Zealand Dollar traders, as it can have a significant impact on the market. In the past two years, inflation in New Zealand has followed global trends, with the CPI Year on Year (Y/Y) dropping from 7.30% to 4.00%. Despite this decline, New Zealand’s CPI remains relatively high compared to other economies around the world, highlighting its unique economic landscape.
Traders are also keeping an eye on domestic inflation, which measures goods and services that do not face foreign competition but can still be influenced by it. The probability of an RBNZ rate cut for the upcoming meeting on May 22nd is currently at 1%, but it is expected to increase later in the year as more traders anticipate cuts. The RBNZ Shadow Board members have recommended keeping the Official Cash Rate (OCR) at 5.5% and cutting rates in 2025.
In terms of technical analysis, the New Zealand Dollar has been trading within a widening formation since January 2023 and is approaching the upper pattern borderline. There is a confluence of resistance levels between 0.6170 – 0.6260, with a potential inverted head and shoulder pattern forming. The MACD line has crossed above its signal line, and price action has broken and closed above multiple moving averages.
The latest Commitment of Traders (COT) report shows that Large Speculator and Commercial positioning levels are in line with price action, with a significant change in positioning towards long for large speculators and the opposite for commercials.
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