• The Kiwi retraces previous losses before hitting resistance at 0.5655.
• The dollar loses ground as the impact of the US CPI report wanes.
• NZD/USD: Below 0.5700 more weakness is likely – UOB.

The New Zealand dollar has bounced strongly from session lows near 0.5500 retracing all the ground lost after the release of the US CPI report. The pair turned positive on the daily chart before hitting resistance at the 1.5655 area.

The kiwi picks up with the USD pulling back from highs

The greenback has lost ground through the US trading session, as the market digested the unexpectedly high US inflation figures released in September’s CPI report.

According to the US Bureau of Labor Statistics, consumer inflation accelerated at a 0.4% pace in September, and 8.3% year-on-year, beating expectations of 0.4% and 8,1% respectively. These figures boosted hopes of a 100 basis point hike in November and pushed the US dollar higher across the board.

In New Zealand, the focus is on the release of September’s Business NZ PMI due later today. Business activity is expected to decelerate to 52.5 from 54.9 the month before, probably as a result of the hawkish turn of the Reserve Bank of New Zealand.

NZD/USD could weaken further while below 0.5700 – UOB

According to FX analysts a UOB, however, the pair remains skewed to the downside while below 0.5700: “Despite dropping to a fresh year’s low of 0.5561 earlier this week, downward momentum is not strong. However, as long as the ‘strong resistance’ at 0.5700 is not breached, NZD could weaken further. That said, any further decline is expected to face solid support at 0.5535.”

Technical levels to watch