NZD/USD pops on CPI beat, eyes test of 61.8% Fibo retracement at 0.6593

• NZD/USD has rallied on the New Zealand CPI beat and is en route for a test of the 61.8% Fibo retracement at 0.6593 and 2nd October highs of 0.6594.
• NZD/USD is currently trading at 0.6587 having printed a post data high of 0.6589, from a low of 0.6494. 

The Kiwi has taken flight after the NZ CPI data arrived at 0.9% q/q vs. expected 0.7% and much better than prior 0.4% q/q - (1.9 % y/y - higher than expected 1.7% y/y, prior 1.5%). This data will have diminished ideas of a rate cut in the near future from the RBNZ although rallies may be shortlived and interpreted as transitory. 

"The USD retreated overnight on the back of trade tensions and softer US data and this cross is likely to continue to be buffeted by global factors, like the FOMC minutes out later this week," analysts at ANZ noted.

Focus on the dollar

Meanwhile, there are a number of arguments for a softer dollar from here out and the following are a list of 5 reasons that one might take a bearish view, rebutted by bulls at HSBC:

• "Bearish USD argument 1 - Fed rates are near the peak and are already priced in. HSBC pushback - Rates may be moving closer to neutral, but this is not the same as the peak rate. Doubts remain about when and how quickly other central banks will raise rates. Also, the level may matter, not just the rate of change.
• Bearish USD argument 2 - The US economy is set to slow, while Eurozone growth will pick up. HSBC pushback - US growth estimates are being revised upwards, while the Eurozone needs growth to recover just to meet existing forecasts. Survey data in Eurozone remains challenging. The market seems to assume a Eurozone recovery but cannot explain the big growth miss so far in 2018.
• Bearish USD argument 3 - Structural forces point to a weaker USD, overwhelming any cyclical support from higher interest rates. HSBC pushback - Eurozone has its structural frailties too, as Italy’s tribulations illustrate. Internal Eurozone imbalances are difficult to address. Fiscal issues can open the question of whether the EUR is divisible, while the USD is not.
• Bearish USD argument 4 – Emerging markets FX is structurally sound and cheap, with USD weakness the flipside. HSBC pushback – We believe emerging market FX does not offer value and those that are ‘cheap’ reflect their risk profile. Foreigners still own much of the local market, suggesting less scope for a rush back into these currencies. Macro frailties remain.
• Bearish USD argument 5 - The USD has not rallied enough or at all given what should have been supportive developments – this shows it is already expensive. HSBC pushback - The USD has continued to rally on a broader basis, even if this is not fully captured by the USD Index (DXY). The USD is not expensive on our metrics, and has room to catch up with these developments, in our view."

ND/USD levels

While the bird is in flight, it still has plenty more altitude to gain to mark a hint of bullishness on the monthly charts remain indicative of a continuation to the downside where we are seeing a sea of red and no obvious indication of any sustainable let-up. However, a break of the descending channel's resistance line and 0.66 the figure opens room to 0.6633 as the 76.4% Fibo target in the near term.