The New Zealand CPI (Consumer Price Index), which is released each quarter, is a key inflation index which measures the change in the price of goods and services charged to consumers. A reading which is higher than the market forecast is bullish for the New Zealand dollar.
Here are all the details, and 5 possible outcomes for NZD/USD.
Published on Monday at 10:45 GMT.
Indicator Background
Analysts consider CPI one of the most important economic indicators, as it is the primary tool used to measure consumer prices and inflation. Thus, a CPI figure which is higher or lower than the market forecast can affect the direction of NZD/USD.
The CPI reading in Q1 of 2011 rose 0.5%, which was very close to the market forecast. The estimate for CPI in Q2 is unchanged. Will the index meet or beat this prediction?
Sentiments and levels
Although New Zealand’s economy remains strong, the European debt crisis and recent Chinese weakness are weighing on the kiwi. Also the US economic situation is undermining the New Zealand currency – the US job market is too weak to encourage risk taking, such as buying New Zealand dollars. This is a positive situation for the greenback, and bad for the ultimate risk asset – the kiwi. Thus, the overall sentiment has turned from neutral to bearish on NZD/USD towards this release.
Technical levels, from top to bottom: 0.8185, 0.8075, 0.80, 0.79, 0.7840, and 0.7723.
5 Scenarios
- Within expectations: 0.2% to 0.8%. In this scenario, NZD/USD could show some slight fluctuation, but it is likely to remain within range, without breaking any levels.
- Above expectations: 0.9% to 1.2%: A stronger reading than predicted could push the pair above one resistance line.
- Well above expectations: Above 1.2%: An unexpectedly sharp rise in inflation could push NZD/USD upwards, with two or more lines of resistance at risk.
- Below expectations: -0.2% to 0.1%: A lower than expected reading could pull the pair downwards, with one support level at risk.
- Well below expectations: Below -0.2%: A very weak reading could result in the pair breaking two or more support levels.
For more on the New Zealand dollar, see the NZD/USD.