Fundamental Factors:
- NZD has shown signs of recovering early in the New Year and remains positive over the short-term.
- Data released in the US yesterday showed inflation rose at a fastest pace in five years.
- Higher inflation could force the Fed to hike rates at a faster rate, unless wage growth keeps up with rising costs.
- Bid tone around the US dollar strengthened in the late North American session following Yellen’s hawkish comments.
- New Zealand’s residential consents fall sharply in November. NZ housing consents dropped 9.2 percent sequentially in November after a revised 2 percent rise in October.
- New Zealand’s annual inflation due 26th Jan will be another major influential factor.
- ANZ forecasts NZ CPI to lift to 1.2% – back in the RBNZ’s target band for the first time since Q3 2014.
Technical Analysis:
- NZD/USD slumped nearly 100 pips overnight after hawkish Yellen's comments.
- The pair is attempting a minor recovery and is currently hovering around 0.7144, up from lows of 0.7117.
- We see strong support by 200-DMA at 0.7089, break below could see further weakness.
- Price action has slipped below daily cloud, which nows acts as resistance.
- Death cross on daily charts and 'Bearish Cypher Pattern' raise scope for downside.
Support levels - 0.71 (38.2% Fib of 0.7485 to 0.6862 fall), 0.7089 (200-DMA), 0.7070 (Double bottom - Jan 13 & dec 5)
Resistance levels - 0.7168 (cloud base), 0.7173 (50% Fib), 0.7187 (cloud top)
Recommendation: Good to go long on dips around 0.7130/40, SL: 0.7089, TP: 0.72/ 0.7220/ 0.7245/ 0.7265
