The NZD is the best performer in trading so far today
And that comes after the core inflation measure rose up to a 7-year high. That said, it does help to tilt the balance in favour of a rate hike by the RBNZ should inflation continue to tick higher. NZD/USD rose to a high of 0.6841 on the day earlier before falling back a little in the past hour but remains near the highs.
The spike saw the pair break above the 200-hour MA (blue line) as buyers take over near-term control and bias remains more bullish now for the pair. However, the gains posted so far today closed in on key near-term levels and that will be something to watch out for:
The earlier highs this month stalled at the 23.6 retracement level @ 0.6855 while there is also resistance seen from the November low (support-turned-resistance) @ 0.6845 - which is where the pair's high stalled nearby today.
There will be two things to look out for in trading later today for the pair. First, it's about a continuation of the gains seen so far (given NZD positioning, further short squeeze is very likely still). Second, it's the question of "is the dollar heading for yet another losing day"? I reckon the second part will take precedence in determining the pair's price action on the day so look out for tests of the resistance levels mentioned if the greenback falters.
Should that give way, it opens up a move towards 0.6900 at the very least. As for downside levels, look out for support at the 0.6800 handle with the 200-hour MA @ 0.6796 nearby with further support from the 100-hour MA @ 0.6773 seen.
