NZD/USD defends 0.7100 as markets await US CPI

• NZD/USD edges higher after a three-day slow grind to the north.
• NZIER forecasts, Fed tapering concerns and virus woes battle sluggish USD to underpin cautious optimism for buyers.
• New Zealand house prices remain elevated in August.
• A lack of major data/events at home, mixed concerns abroad keep traders confused ahead of the key data.

NZD/USD clings to mild gains above 0.7100 after a mildly upbeat performance in the last three days. That said, the kiwi pair seesaws around 0.7120 during the early Tuesday morning in Asia.

The latest economic forecasts from the NZ Institute of Economic Research (NZIER) and New Zealand (NZ) Prime Minister Jacinda Ardern’s lockdown announcements join the coronavirus woes and Fed tapering concerns to weigh on the kiwi prices. However, upbeat headlines from China and recently released housing data keep NZD/USD buyers hopeful.

As per the Real Estate Institute of New Zealand (REINZ), Median prices for residential property across NZ increased by 25.5% from $677,400 in August 2020 to a record $850,000 in August 2021. The same requires the Reserve Bank of New Zealand (RBNZ) to act.

Elsewhere, the NZIER revised down short-term economic forecasts and pour cold water on the face of RBNZ rate hike expectations. On the same line was NZ PM Ardern’s announcement of the extended virus-led activity restriction status until September 22. While the epicenter Auckland will remain at alert level 4 before turning to level 3, the rest of the country will remain at level 2.

On a broader front, record US Producer Price Index (PPI) data and the early week comments from Philadelphia Federal Reserve Bank President Patrick Harker challenged the NZD/USD bulls. Alternatively, China’s growing assertiveness in diplomatic relations with the global leaders recently renewed market optimism. The same requires the White House to host a ‘Quad’ summit on September 24 with the leaders of India, Australia and Japan. Even so, the dragon nation’s crackdown on technology companies, recently on Ali Pay, joins the headlines concerning typhoon Chanthu and tropical storm Nicholas to challenge the optimists.

Against this backdrop, US Dollar Index (DXY) closed unchanged on Monday’s North American trading, after refreshing the monthly top, whereas the US 10-year Treasury yields 1.5 basis points to 1.32%. Further, the Wall Street benchmarked closed mixed.

Moving on, a lack of data/events at home will keep NZD/USD traders directed towards external factors for fresh impulse. Among them, the cautious sentiment ahead of the US August Consumer Price Index (CPI) will be the key as it helps forecast the next week’s Fed move. Additionally, RBA policymakers and risk catalysts are important too.

Read: US Inflation Preview: CPI critical for taper, three scenarios for the dollar

Technical analysis

A slow but steady recovery from 100-DMA, around 0.7078, in the last three days keeps NZD/USD buyers hopeful to refresh the monthly high near 0.7175.