Forex Today: New Zealand Inflation Misses Forecasts; Kiwi Slips

1. New Zealand inflation came in below expectations earlier today. Third-quarter CPI rose by 0.7%, against a consensus forecast of 0.8%, while annual inflation slowed from 4.1% to 3.7%, below the 3.8% expected. The annual reading also undershot the Reserve Bank of New Zealand’s 3.9% forecast. NZD/USD dipped towards $0.5692 immediately after the release, while the NZD/JPY cross also dropped.

2. The New Zealand inflation miss has not removed expectations of another RBNZ hike. Annualised inflation remains above the Bank’s 1%–3% target range, and another rate increase is still expected at next week’s policy review. The important distinction is that inflation has slowed by more than anticipated, not returned to target. This gives policymakers somewhat more room for caution, but it is not yet a convincing argument that tightening is finished.

3. The US Dollar’s recent decline has paused. Traders are becoming more cautious ahead of next week’s central-bank meetings, with holds expected from the Fed, ECB, and Bank of Japan. EUR/USD is trading around 1.1245, with most trend traders poised to exit their short positions if there is a daily close above 1.1300. The Euro has steadied despite France’s continuing fiscal problems, but its recovery remains modest compared with the preceding long-term decline.

4. Asian equities are weaker despite yesterday’s higher Wall Street close. Strong technology earnings helped US stocks advance, but the optimism has not carried through convincingly into Asia. The broad Asia-Pacific index excluding Japan is down about 0.2%, Japan’s Nikkei 225 Index is approximately 0.4% lower, and South Korean shares have fallen by more than 1%. These moves underline the continuing fragility of the recovery in the AI trade. US indices are also lower in off-hours trading today so far.

5. Crude Oil is rising again on Middle East supply concerns and talk of renewed full-scale kinetic war between the USA/Israel and Iran. WTI is rising firmly and looks set to test the major resistance level at $100. Brent has gained approximately 1.1% to around $110, close to its recent five-month high. With a general election in Israel next week, and US mid-term elections on 3rd November, a renewal of the war in November is looking possible, which would certainly place bullish pressure on Crude Oil. Trading this energy is tricky as it is so driven by geopolitical developments these days.

6. Bitcoin earlier extended its recovery but has now made a bullish reversal from the resistant area around $85,000 and is now heading back towards the $80,000 area. A daily close below $80,000 will shake out most trend traders who are still long of Bitcoin and hoping for a bullish breakout beyond $87,293. This is still in play, and the price is within a consolidation zone, but a bearish breakdown begins to look like a more likely scenario.

7. Gold has fallen below $4,100, continuing to trade lower within its descending price channel. There have been a few stabs lower which attract some buying as the big round number of $4,000 comes close, but the price action suggests still lower prices.