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KiWi CPI Jumps

The Kiwi is off to a solid start in Asian trading after a better than expected CPI print.
Q3 CPI came in at 0.7% q/q (vs. expected 0.6%) and 1.5% y/y (vs. expected 1.4%). Both figures would have been very pleasing to the RBNZ who have previously cut rates hard this year in a bid to stoke inflation.
In fact, it was the very soft CPI numbers from earlier in the year that has been the cause of the aggressive approach that we’ve seen from the RBNZ. So today’s result suggests there is some light at the end of the tunnel.
Overall, we do have to recognise that while there has been a nice up-tick here, inflation is still lagging under the ideal target band. That generally sits at between 2-3%. So 1.7%, while above expectations, is still a little flat for the RBNZ to truly be happy with.

So while this result might hold the doves back somewhat, there will need to be a further improvement here. That said, there was the expectation, that the cuts to official rates, would take up to 18 months to really start to filter through the economy, so this is a very positive first step.

Technical Outlook

The NZD/USD has been in a battle with the 0.6300 for a while now and today’s result will help to some degree. While the longer-term trend is down, price hasn’t really made much headway breaking this level.
The lowest levels we’ve seen recently has basically been just under that point, around the 0.6265 mark.
My plan has been to short a break under key support but as yet, we haven’t really seen a meaningful attempt on a level like 0.6250.
Given today’s result, I would expect to see some upside in the Kiwi and we can now start looking for a test of 0.6350 to the upside as another potential break out play.

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