New Zealand Q3 inflation has risen at its fastest pace in 10 years with the latest release to start the FX week. The annual inflation rate moves up to 4.9% from 3.3% in the second quarter. This has caused the New Zealand bond yield to rise sharply higher as expectations now increase for a 50 bps rate hike at the next RBNZ rate meeting. Bulls seemed rather unaffected by a generally softer tone around the equity markets, which tends to undermine the perceived riskier kiwi. Fears that a faster-than-expected rise in inflation could derail the global economic recovery weighed on investors' sentiment. The concerns were further fueled by Monday's disappointing Chinese data, showing that the economic growth decelerated sharply from 7.9% to 4.9% during the third quarter.

BULLISH AND BEARISH CONDITIONS/ POSSIBILITIES :

On the technical side we have some strong exponential moving averages 50 and 200 in the daily time frame with a cross over at the current market price - acting as a major resistance along side 50% fibo retracement level. Another point of observation is 0.8856 price action which has been acting as a resistance since early June and critical point of breakout. For further continuation of bullish trend, the pair needs to break above the aforementioned resistance zones to extend its gains towards 0.9030. On the bullish side, after New Zealand Dollar versus Canadian Dollar broke out of our upper trend line - that opened the gates towards 0.8856, but the hawkish tone seems to be limited by the 50% fibo level on the daily chart, only a breakout above would lead the market towards 61.8% fibo zone i.e 0.8918 and 0.9030. 

NZDCAD

Oct 19 2021