Investors Lock Gaze on US CPIs, RBNZ Decides on Mon. Policy

WILL RISING US INFLATION INCREASE BETS OVER AN EARLIER FED TIGHTENING?

The US dollar traded mostly lower on Monday and during the Asian session Tuesday. It gained only against JPY, while it lost the most ground versus AUD, NZD, and CAD in that order.

EURO STOXX 50 — TECHNICAL OUTLOOK

The Euro Stoxx 50 cash index traded higher yesterday, breaking above the downside resistance line drawn from the high of June 17th. What’s more, the rally took the index above last Wednesday’s high of 4087, thereby confirming a forthcoming higher high. In our view, yesterday’s jump has turned the technical picture back to positive, which means that further advances are likely.

RBNZ LIKELY TO SOUND MORE OPTIMISTIC

Tonight, during the Asian morning Wednesday, the spotlight is likely fall on the RBNZ, which decides on monetary policy. Although no policy action is expected, the tone of the accompanying statement may play a major role in shaping expectations over the Bank’s policy plans. Last week, market participants brought forth their bets over when this Bank will push the hike button, with 60% of New Zealand’s financial-sector firms expecting interest rates to rise over the coming year. This happened after a closely watched business confidence index jumped to its highest in four years.

NZD/USD — TECHNICAL OUTLOOK

NZD/USD traded higher yesterday, but hit resistance near 0.7010 during the Asian session today, and it pulled back somewhat. Overall, since May 27th, most of the price action has stayed below a downside resistance line, as well as below all three of our moving averages on the 4-hour chart. In our view, this paints a somewhat negative picture, and thus, we would see decent chances for the pair to drift lower.

AS FOR THE REST OF TODAY’S EVENTS

During the early EU session, we already got Germany’s final CPIs for June, which just confirmed their preliminary estimates. Later in the day, after the US CPIs, the API report on crude oil inventories is coming out, but as it is always the case, no forecast is available.

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