New Zealand Dollar trades flat on muted Monday

• The New Zealand Dollar trades little changed on Monday as markets tread water.
• Kiwi remains on the back foot after recent Fedspeak resurrected the chances of a rate hike. 
• Hawkish commentary from Fed officials has set the US Dollar trending higher against the Kiwi, NZD/USD declines. 

The New Zealand Dollar (NZD) trades flat amid a muted market mood on Monday. Most traders are waiting for bigger macroeconomic data releases scheduled for Tuesday and Wednesday before taking big positions. 

The short-term technical situation is precarious, however, threatening deeper losses on the horizon as price edges ever closer to breaking below a key support level at 0.5874.

Daily digest market movers: New Zealand Dollar flat on Monday

• The New Zealand Dollar trades little changed at the start of the week as traders look ahead to more significant data releases later in the week. 
• NZD could very well be impacted by Chinese Industrial Production and Retail Sales data on Wednesday morning at 02:00 GMT.
• On Monday, China released figures for New Loans in October, which showed a seasonal slowdown in lending to 738.4B from 2310.0B in September, but still more than the 650.0B expected. It suggests credit remained buoyant during the month. 
• China's M2 Money Supply (YoY), showing the amount of money held in most kinds of bank accounts, ticked down to 10.3% in October, compared to 10.4% previously.  
• Downbeat Chinese inflation data had dampened the outlook for global growth, weighing on NZD last week, because New Zealand is a major commodity exporter – especially of dairy products – to China. 
• NZD fell midweek last week on the back of an inflation report from the RBNZ that showed both one-year-out and two-years-out inflation expectations for New Zealand falling in Q3 compared to the previous quarter.
• The lower inflation expectations imply the RBNZ is less likely to raise interest rates, making the country a less attractive place for global investors to park their capital. 
• Inflation expectations have pushed higher in the US after University of Michigan inflation expectations data, released November 10, showed an uptick to 4.4% in November for inflation expected in the year ahead, compared to 4.2% in October and 3.2% in September. 
• This reflects the more hawkish commentary that has been coming out of the Federal Reserve (Fed) recently, which suggests a greater probability the Fed may still raise interest rates before it is done with its tightening cycle. 
• US Inflation data on Tuesday at 13:30 GMT should shine more light on price rises. A rise of 0.1% MoM and 3.3% YoY is expected for headline inflation in October, whilst core is forecast to increase by 0.3% and 4.1%. 

New Zealand Dollar technical analysis: NZD/USD inches lower, threatening more losses

NZD/USD – the number of US Dollars one New Zealand Dollar can buy – edges lower into the 0.5870s on Monday, reaching a key make-or-break level for trend watchers. 

New Zealand Dollar vs US Dollar: Daily Chart

The pair is a few pips away from breaking below the last major lower high of the previous uptrend, made on November 2, at 0.5874 (visible on the 4-hour chart below), close to the blue 100-4-hour Simple Moving Average (SMA). A break below would probably indicate a short-term bearish trend reversal and deeper losses. 

The next target to the downside would probably be at 0.5862, where the 61.8% Fibonacci retracement of the recovery from the year-to-date lows in late October and early November. The main target, however, sits at 0.5790, then 0.5773. 

New Zealand Dollar vs US Dollar: 4-hour Chart

As long as the November 2 lows stay intact, however, a threat of a recovery and decisive break above the November 3 high at 0.6001 remains, which would reconfirm the short-term bullish bias. The likely target thereafter would be the 0.6055 October high.  

The medium and long-term trends are both still bearish, suggesting the potential for more downside is strong. 

Bulls would have to push above the 0.6055 October high to change the outlook in the medium term and indicate the possibility of the birth of a new uptrend.