Article Highlights

  • New Zealand CPI up 0.3% in Q3 vs. 0.2% forecast, 0.4% previous
  • RBA Financial Stability Report: Housing risks seem higher than average
  • Euro zone final CPI numbers due
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The Kiwi was unable to sustain its forex gains from the stronger-than-expected quarterly inflation report, as analysts speculated that the 0.3% increase in price levels won’t be enough to eliminate the chances of another RBNZ cut later this year. According to number crunchers over at ASB, housing-related costs were mostly responsible for the pickup in inflation as price levels of other goods remained subdued.

It didn’t help that the RBA followed up with a downbeat Financial Stability report highlighting the risks in the housing market. The central bank noted that banks might need to act in order to restrain mortgages, leaving some market analysts to speculate that the RBA is priming for another rate cut.

AUD/USD is down 38 pips back below the .7300 handle (-0.51%), NZD/USD retreated by 26 pips to .6824 (-0.38%), AUD/JPY fell 23 pips to 86.83 (-0.28%), and NZD/JPY is down 12 pips to 81.37 (-0.15%).

European currencies are taking advantage of this comdoll selloff, with EUR/NZD up 64 pips to 1.6672 (+0.37%), EUR/AUD up 85 pips to 1.5612 (+0.57%), GBP/NZD up 125 pips to 2.2660 (+0.54%), and GBP/AUD up 139 pips to 2.1227 (+0.66%).

Can the euro hold on to its recent forex gains, though? The region’s final CPI readings are up for release at 10:00 am GMT and any downgrades from the initial estimate of a 0.1% decline in the headline figure could spur a sharp drop. Keep in mind that the ECB hinted that they’re open to increasing stimulus in order to keep deflation in check so any negative readings might get the easing talks started once more.

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