NZD/USD extends gains toward 0.7000 ahead of FOMC

• US dollar retreats after US CPI and ahead of FOMC. 
• NZD/USD rises to the highest in a month. 
• Kiwi among the top performers of the day. 

The NZD/USD pair is rising for the fourth day in-a-row and it was testing the 0.7000 handle. The technical perspective improved significantly for the kiwi today after breaking above 0.6950/60. 

After the release of US CPI data, the US dollar lost ground across the board and boosted the NZD/USD. The pair continued to rise after the beginning of the American session and reached at 0.6997 the highest level since October 24. As of writing it was holding near the top, with the bullish tone intact ahead of the FOMC meeting. 

Inflation figures in the US triggered a decline of the greenback. The Consumer Price Index rose 0.4% in November in line with expectations while the core-CPI climb 0.1% below the 0.2% expected. Now investors await the FOMC statement. A 25bp rate hike is widely expected. If the Fed delivers that rate hike, market participants will likely focus on the tone of the statement, the updated projections and Yellen’s press conference. The outlook presented for 2018 is likely to determine the next move for the pair. 

Another event that presents some risk will be US President Donald Trump’s speech on the tax reform plan, to be delivered later today. 

Technical levels to watch

From Friday’s close, NZD/USD rose more than 150 pips and today is breaking above November highs. A consolidation on top of 0.6960 will support more gains for the pair. Now the immediate resistance is the 0.7000 psychological area and then the 0.7055/60 area. On the downside, if the kiwi drops back below 0.6960 the bullish pressure would ease. Under that level, supports might be seen at 0.6930 (Dec 13 low) and 0.6905 (Dec 5 high).