NZD/USD forms a rising wedge pattern ahead of US CPI and PPI data

By: Crispus Nyaga
Crispus Nyaga
Crispus is an active trader, where he is followed and copied at Capital.com. He lives in Nairobi with his wife, son,… read more.
on May 12, 2021
  • The NZD/USD pair declined as the dollar gained ahead of US inflation data.
  • The pair has formed a rising wedge pattern on the four-hour chart.
  • Analysts expect that US inflation will rise at the fastest pace in a decade.

The NZD/USD pair retreated ahead of the latest US consumer inflation numbers. It dropped to 0.7227, which was 1% below the highest level this month. 

NZD/USD
NZD/USD price action

US inflation concerns

The biggest focus among traders is on the upcoming US consumer and producer inflation numbers that will come out on Wednesday and Thursday, respectively. The data is expected to show that consumer prices rose by a year-on-year rate of 3.6%, which will be the fastest growth in more than a decade. 

Are you looking for fast-news, hot-tips and market analysis? Sign-up for the Invezz newsletter, today.

The core consumer price index that excludes volatile food and energy products is expected to rise by 2.3% year on year. A higher-than-expected consumer inflation number will signal that the Fed may start tightening its conditions earlier than expected. This will be a bearish signal for the NZD/USD pair. 

The data from the US will come a day after Statistics New Zealand published relatively strong retail sales numbers. The data showed that card spending increased by N$4.3 billion between April last year and this year. In total, the sales increased by 4% month-on-month and by 108.7% year-on-year. This is a good thing for the economy since the retail sector is one of the biggest employers. In a statement, Geraldine Duoba of the agency said:

“With New Zealand moving up and down alert levels several times in February and March, there is likely to have been pent-up demand resulting in higher spending in April.”

Other numbers have revealed that the New Zealand economy is on a quick path to recovery. The country has not reported a coronavirus case in months and it has already opened its airports for Australians. Further, manufacturers and service providers have reported more business. Most importantly, its biggest trading partners like China and Australia have reported strong growth. This could lead to more demand for New Zealand goods.

NZD/USD technical forecast

NZD/USD
NZD/USD technical chart

The four-hour chart shows that the NZD/USD found a substantial resistance at this week’s high of 0.7300. The pair also seems to be forming a rising wedge pattern, which is usually a bearish sign. Still, the pattern has a relatively long way to go until it reaches its confluence zone. 

It has also remained between the 50% and 38.2% Fibonacci retracement level and below the 15-day and 25-day moving average. Therefore, the pair will likely keep falling as bears target the lower side of the wedge pattern at 0.71800. 

Invest in crypto, stocks, ETFs & more in minutes with our preferred broker, eToro
10/10
67% of retail CFD accounts lose money