• NZD/USD creeps below the 0.6260 area after US data showed that inflation is still looming.
• The US Producer Price Index rose above estimates as inflationary pressures reignited.
•  NZD/USD Price Analysis: To resume its downtrend, with a daily close below the 100-DMA; otherwise, a test of 0.6300 is on the cards.

The NZD/USD extends its losses, though trimmed some after hitting a year-to-date (YTD) low of 0.6232, on the back of US data showing that inflationary pressures remain. Hence, speculators had begun to push back rate cuts foreseen by the end of 2023 as they began to price-in higher rates. At the time of writing, the NZD/USD exchanges hands at 0.6260.

High US bond yields underpin the US Dollar after strong US data

Economic data revealed in the United States (US) keep investors nervous, as shown by Wall Street, set to finish with losses. The Producer Price Index (PPI) for January on a monthly basis, came higher-than-expected, in headline PPI and core PPI, with readings at 0.7% and 0.4%, respectively. Echoing some of the inflationary pressures witnessed in the Bureau of Labor Statistics (BLS) data, the Philadelphia Fed Manufacturing Index plummeted severely to -24.3 from -7.4 estimates, underscoring higher input prices after ten straight months of lower printings.

Once data hit the screens, the NZD/USD tumbled and reached a new daily low of 0.6232, before reversing its course, influenced by US Dollar (USD) strength. US Treasury bond yields climbed as traders began to price in no cuts by the Federal Reserve (Fed) in 2023, after CPI and PPI data showed a slight uptick in inflation.

On the New Zealand front, the impact of cyclone Gabrielle would impact the country’s economy, as its damages are pending to be quantified. According to ANZ analysts, “there will be cost pressures as a result of the cyclone. Construction costs, rents, insurance, the cost of food (and many other costs) are likely to face further upwards pressure. There is not much monetary policy can do to help in an event like this – that is best managed through fiscal policy which is faster acting and more targeted. Although the impact of the cyclone is considered inflationary, we expect the RBNZ will lift the OCR 50bp this week, rather than the 75bp they signalled in November.”

NZD/USD Technical analysis

Once the NZD/USD edged below the 200 and 100-day Exponential Moving Averages (EMAs), each at 0.6289 and 0.6263, exposed the pair to sellers. Nevertheless, failure to crack below the 0.6230 area keeps investors hopeful that the bounce could open the door to reclaim the previously-mentioned long-term moving averages. If that scenario plays out, the NZD/USD could rally towards 0.6300 after regaining the 0.6260/90 area. Otherwise, the NZD/USD pair would resume its bearish continuation toward the  0.6200 area.