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Boosted by risk appetite! Will Kiwi bulls extend their wins this week? Here are the potential catalysts.

Quarterly CPI (Oct. 15, 9:45 pm GMT)

Market bulls charged for the Kiwi last July when the “sectoral factor model” of the quarterly CPI report – RBNZ’s preferred core inflation gauge – pointed to a faster price increase and possibly a rate hike from the central bank down the road.

This week analysts expect to see that quarterly prices have risen by 0.7% in Q3 2018, faster than the Q2’s 0.4% rate.

Remember that inflation remaining below the RBNZ’s 2.0% target is one of the reasons why the central bank still thinks the economy needs “continued supportive monetary policy.”

Faster-than-expected price increases (both from headline or the sectoral factor model) could bring the bulls back to the Kiwi’s yard. On the other hand, a downside surprise could extend the Kiwi’s bearish streak, at least until a new catalyst comes along.

Overall risk sentiment

As you can see below, market sentiment and dollar selloff pulled the Kiwi higher last week.

This week pay close attention to continuation or reversal of last week’s trends in the equities and bonds markets.

Trump lay the blame on the Fed’s tightening schedule last week and caused havoc on dollar demand, so it will be interesting to see if he sticks to the narrative if last week’s trends continue.

The Donald has also yet to comment on China’s latest trade data, so we could see some U.S.-China trade war action if the POTUS does end up tweeting a word or two about it.

Last Week’s Price Review

The Kiwi apparently had a reversal of fortune since it was last week’s biggest loser but is currently at the head of the forex pack this week (as of 7:00).

And like the Aussie. Kiwi bulls can thank Trump and the Greenback’s overall weakness for the Kiwi’s good performance since risk aversion was the dominant sentiment this week.

Overlay of NZD Pairs: 1-Hour Forex Chart
Overlay of NZD Pairs: 1-Hour Forex Chart

Like the Aussie, the Kiwi found some buyers at the start of the week, even though risk aversion prevailed. And like the Aussie, the Kiwi’s rise may have been due to the PBoC’s liquidity injection and/or short covering after last week’s NZD sell-off.

Demand for the Kiwi was only limited, though, likely because of the risk-off vibes. And so the Kiwi began trading sideways after that.

The Kiwi would begin moving uniformly higher again during Tuesday’s U.S. session, very likely because of the risk-on vibes at the time. Risk-taking then persisted until Wednesday’s Asian session, so the Kiwi raked in even more gains.

However, risk aversion returned in force during Wednesday’s London session and then intensified during Wednesday’s U.S. session, so the Kiwi staged a broad-based retreat (except against CAD and AUD).

Fortunately for the Kiwi, Trump said the following during the late U.S. session:

“I think the Fed is making a mistake. They are so tight. I think the Fed has gone crazy.”

The Kiwi then trended broadly and strongly higher after that before finally encountering sellers again during the later half of Thursday’s U.S. session, likely because of the risk-off vibes at the time. NZD pairs are still well above last week’s closing prices, though.

Incidentally, the Kiwi’s rally in the wake of Trump’s comments against the Fed helped to cement the Kiwi’s gains, so Kiwi bulls can sing their praises to Trump for the Kiwi’s good performance this week.