Annual CPI in the US is forecast to rise to 8.8% in June. Markets are not sure about the size of the Fed's September rate hike. Core inflation is set to edge lower on falling crude oil prices.  The relentless US dollar rally extends further ahead of the highly-anticipated inflation data from the US. The US Dollar Index (DXY), which tracks the greenback’s performance against a basket of six major currencies, is already up more than 3% in July amid growing fears of the global economy tipping into recession. The US Bureau of Labor Statistics is expected to report that the Consumer Price Index (CPI) rose to a fresh multi-decade high of 8.8% on a yearly basis in June from 8.6% in May. The Core CPI, which excludes volatile food and energy prices, is forecast to decline to 5.8% from 6%. Crude oil prices fell sharply in June, suggesting that it wouldn’t be surprising to see a retreat in core inflation. After having posted gains for six straight months, the barrel of West Texas Intermediate (WTI) lost more than 8% in June. US annual CPI chart Market implications The US dollar remains the go-to safe-haven asset as the US Federal Reserve remains on track to continue to tighten its policy with the US economy remaining relatively healthy. The US central bank is widely expected to hike its policy rate by 75 basis points (bps) in July and several FOMC policymakers, including Chairman Jerome Powell, voiced their willingness to do so. Investors, however, are not certain about the size of the September rate increase. After the monthly jobs report showed that Nonfarm Payrolls in the US rose more than expected in June, the probability of one more 75 bps hike in July jumped to 30% from 15%, according to the CME Group’s FedWatch Tool. Hence, a hot inflation report could trigger a similar reaction and help the dollar preserve its strength against its rivals. On the other hand, an annual CPI print in line with the market consensus could cause a “buy the rumor, sell the fact” market action. White House Press Secretary Karine Jean-Pierre told reporters on Monday that she expects new CPI data to be “highly elevated.” Additionally, the Relative Strength Index (RSI) indicator on the daily DXY chart holds above 70, suggesting the index is overbought and that it could stage a technical correction before continuing its rally. The last time when the daily RSI climbed above 70 in late April, DXY lost more than 1% before resuming its uptrend. Unless CPI figures surpass analysts’ estimates, investors could take the opportunity to book their profits and cause the dollar to weaken. DXY daily chart An unexpected decline in annual CPI could cause market participants to reassess the Fed’s rate outlook and open the door for a USD selloff. Furthermore, a lower-than-expected print could also have a positive impact on market mood and cause the bearish pressure on the greenback to increase. With the Fed going into its blackout period on July 16, investors might refrain from betting on further dollar strength, and DXY could stay in a consolidation phase until the Fed’s policy announcements on July 27. 

The Reserve Bank of New Zealand is seen raising OCR by 50 bps to 2.5% in July. Hard-landing risks unlikely to dissuade the RBNZ at this policy meeting. The kiwi could see a brief correction if the central bank sticks to its hawkish stance. The Reserve Bank of New Zealand (RBNZ) is on a hat-trick, as it is set to hike the key policy rate for the third meeting in a row this Wednesday. With increasing odds of a global recession, will the central bank hint at any slowdown in its pace of tightening? What would it mean for the NZD/USD pair? RBNZ forward guidance holds the key The RBNZ’s third consecutive 50 bps rate increase on Wednesday will lift the Official Cash Rate (OCR) from 2% to 2.5%. The central bank kicked off its tightening cycle in October 2021 and since then has resorted to super-sized rate hikes to fight raging inflation. The policy announcement will not be accompanied by any updated projections or be followed by Governor Adrian Orr’s press conference. A majority of the economists forecast the RBNZ raising rates by 50 basis points to 2.50% at its July 13 meeting while expecting the OCR to reach 3.50% or higher by the end of this year. In its May policy meeting, the RBNZ continued with its hawkish forward guidance by raising its forecast for the terminal rate to a 3.9% peak by mid-2023 from 3.35% previous. It also emphasized a “commitment to ensuring consumer price inflation returns to within the 1 to 3 percent target range.” Heading into the policy announcements, the South Pacific Island nation tolerates a 30-year high inflation rate of 6.9%, reported in the first quarter of 2022. The inflation expectations in the coming months are expected to remain higher, suggesting that the central bank will stay on its hawkish course to control inflation without risk of hard-landing. The RBNZ’s inflation target range is 1-3%. It’s worth noting that New Zealand's economy contracted marginally in Q1, with GDP falling by 0.2%, raising fears of a technical recession should the kiwi central bank’s aggressive rate hike stance deteriorate the economic activity further. The risks of hard-landing are unlikely to dissuade the RBNZ from delivering a super-sized rate hike this month, although it could alarm the bank if the economy is tipping into a recession. Fresh lockdowns in China due to covid flareups, surging energy costs and Fed’s aggressive tightening path are also already amplifying fears of a globalized recession. Therefore, the RBNZ could be compelled to slow down on its rate-hike track potentially from its August meeting.   Trading NZD/USD with RBNZ decision Wednesday’s RBNZ announcement could rescue NZD bulls from over two-year lows, should the bank stick to its hawkish guidance on the interest rates. In such a case, NZD/USD could rebound towards the 0.6200 level. A recovery in risk sentiment combined with a broad US dollar retreat is critical to aiding the pullback in the currency pair. The kiwi pair could resume its downtrend towards 0.6000 if the central bank raises concerns over the economic slowdown and turns rather cautious. This could be seen as a dovish rate hike and negative for NZD buyers. NZD/USD’s reaction to the RBNZ outcome could be brief, as the dynamics of the dollar and the market’s risk perception will play a pivot role.

The Reserve Bank of New Zealand is seen raising OCR by 50 bps to 2.5% in July. Hard-landing risks unlikely to dissuade the RBNZ at this policy meeting. The kiwi could see a brief correction if the central bank sticks to its hawkish stance. The Reserve Bank of New Zealand (RBNZ) is on a hat-trick, as it is set to hike the key policy rate for the third meeting in a row this Wednesday. With increasing odds of a global recession, will the central bank hint at any slowdown in its pace of tightening? What would it mean for the NZD/USD pair? RBNZ forward guidance holds the key The RBNZ’s third consecutive 50 bps rate increase on Wednesday will lift the Official Cash Rate (OCR) from 2% to 2.5%. The central bank kicked off its tightening cycle in October 2021 and since then has resorted to super-sized rate hikes to fight raging inflation. The policy announcement will not be accompanied by any updated projections or be followed by Governor Adrian Orr’s press conference. A majority of the economists forecast the RBNZ raising rates by 50 basis points to 2.50% at its July 13 meeting while expecting the OCR to reach 3.50% or higher by the end of this year. In its May policy meeting, the RBNZ continued with its hawkish forward guidance by raising its forecast for the terminal rate to a 3.9% peak by mid-2023 from 3.35% previous. It also emphasized a “commitment to ensuring consumer price inflation returns to within the 1 to 3 percent target range.” Heading into the policy announcements, the South Pacific Island nation tolerates a 30-year high inflation rate of 6.9%, reported in the first quarter of 2022. The inflation expectations in the coming months are expected to remain higher, suggesting that the central bank will stay on its hawkish course to control inflation without risk of hard-landing. The RBNZ’s inflation target range is 1-3%. It’s worth noting that New Zealand's economy contracted marginally in Q1, with GDP falling by 0.2%, raising fears of a technical recession should the kiwi central bank’s aggressive rate hike stance deteriorate the economic activity further. The risks of hard-landing are unlikely to dissuade the RBNZ from delivering a super-sized rate hike this month, although it could alarm the bank if the economy is tipping into a recession. Fresh lockdowns in China due to covid flareups, surging energy costs and Fed’s aggressive tightening path are also already amplifying fears of a globalized recession. Therefore, the RBNZ could be compelled to slow down on its rate-hike track potentially from its August meeting.   Trading NZD/USD with RBNZ decision Wednesday’s RBNZ announcement could rescue NZD bulls from over two-year lows, should the bank stick to its hawkish guidance on the interest rates. In such a case, NZD/USD could rebound towards the 0.6200 level. A recovery in risk sentiment combined with a broad US dollar retreat is critical to aiding the pullback in the currency pair. The kiwi pair could resume its downtrend towards 0.6000 if the central bank raises concerns over the economic slowdown and turns rather cautious. This could be seen as a dovish rate hike and negative for NZD buyers. NZD/USD’s reaction to the RBNZ outcome could be brief, as the dynamics of the dollar and the market’s risk perception will play a pivot role.

The Reserve Bank of New Zealand is seen raising OCR by 50 bps to 2.5% in July. Hard-landing risks unlikely to dissuade the RBNZ at this policy meeting. The kiwi could see a brief correction if the central bank sticks to its hawkish stance. The Reserve Bank of New Zealand (RBNZ) is on a hat-trick, as it is set to hike the key policy rate for the third meeting in a row this Wednesday. With increasing odds of a global recession, will the central bank hint at any slowdown in its pace of tightening? What would it mean for the NZD/USD pair? RBNZ forward guidance holds the key The RBNZ’s third consecutive 50 bps rate increase on Wednesday will lift the Official Cash Rate (OCR) from 2% to 2.5%. The central bank kicked off its tightening cycle in October 2021 and since then has resorted to super-sized rate hikes to fight raging inflation. The policy announcement will not be accompanied by any updated projections or be followed by Governor Adrian Orr’s press conference. A majority of the economists forecast the RBNZ raising rates by 50 basis points to 2.50% at its July 13 meeting while expecting the OCR to reach 3.50% or higher by the end of this year. In its May policy meeting, the RBNZ continued with its hawkish forward guidance by raising its forecast for the terminal rate to a 3.9% peak by mid-2023 from 3.35% previous. It also emphasized a “commitment to ensuring consumer price inflation returns to within the 1 to 3 percent target range.” Heading into the policy announcements, the South Pacific Island nation tolerates a 30-year high inflation rate of 6.9%, reported in the first quarter of 2022. The inflation expectations in the coming months are expected to remain higher, suggesting that the central bank will stay on its hawkish course to control inflation without risk of hard-landing. The RBNZ’s inflation target range is 1-3%. It’s worth noting that New Zealand's economy contracted marginally in Q1, with GDP falling by 0.2%, raising fears of a technical recession should the kiwi central bank’s aggressive rate hike stance deteriorate the economic activity further. The risks of hard-landing are unlikely to dissuade the RBNZ from delivering a super-sized rate hike this month, although it could alarm the bank if the economy is tipping into a recession. Fresh lockdowns in China due to covid flareups, surging energy costs and Fed’s aggressive tightening path are also already amplifying fears of a globalized recession. Therefore, the RBNZ could be compelled to slow down on its rate-hike track potentially from its August meeting.   Trading NZD/USD with RBNZ decision Wednesday’s RBNZ announcement could rescue NZD bulls from over two-year lows, should the bank stick to its hawkish guidance on the interest rates. In such a case, NZD/USD could rebound towards the 0.6200 level. A recovery in risk sentiment combined with a broad US dollar retreat is critical to aiding the pullback in the currency pair. The kiwi pair could resume its downtrend towards 0.6000 if the central bank raises concerns over the economic slowdown and turns rather cautious. This could be seen as a dovish rate hike and negative for NZD buyers. NZD/USD’s reaction to the RBNZ outcome could be brief, as the dynamics of the dollar and the market’s risk perception will play a pivot role.

AUD/USD Current Price: 0.6756 Australian NAB’s Business Confidence unexpectedly shank to 1 in June. A temporal pause in risk aversion weighed on the greenback ahead of US inflation data. AUD/USD has corrected oversold conditions and may recover further once above 0.6790. The AUD/USD pair heads into the Asian session, trading near a daily high of 0.6778, recovering from an early low of 0.6710. The greenback has been consistently rising on the back of markets’ concerns about economic progress. Slowing growth coupled with record inflation levels spooked investors away from high-yielding assets, while central banks’ decisions to tighten their monetary policies added to the mixture. Financial markets’ turmoil paused on Tuesday as the US government cooled down speculation of a recession in the country. However, fresh data to be out on Wednesday will give clearer clues than a White House memo. The country will publish the June Consumer Price Index, foreseen at 8.8% YoY, up from the previous 8.6%. Meanwhile, Australia published June NAB’s Business Confidence, which sunk to 1 from 8 in the previous month, missing an expected improvement to 8. NAB’s Business Confidence in the same period printed at 13, better than the 9 expected but below the previous 15. The country will publish July Westpac Consumer Confidence on Wednesday, previously at -4.5%. AUD/USD short-term technical outlook The AUD/USD pair is trading in the lower end of its latest range, still bearish but hinting at a possible bullish correction, without confirming it. Technical indicators in the daily chart are recovering from near oversold readings but are still well into negative territory. At the same time, moving averages maintain their bearish slopes far above the current level. In the near term, and according to the 4-hour chart, the chances of further recoveries cooled down. Technical indicators have bounced from near oversold levels but lost their upward strength and turned flat below their midlines. A bearish 20 SMA provides immediate resistance at around 0.6790, maintaining its bearish slope below the longer ones. Support levels 0.6710 0.6670 0.6625 Resistance levels: 0.6790 0.6840 0.6885 View Live Chart for the AUD/USD

EUR/USD dropped closer to the parity mark for the first time since December 2002. The energy crisis in Europe continued fueling recession fears and weighed on the euro. The relentless USD rally to a two-decade high exerted additional pressure on the pair. The EUR/USD pair struggled to capitalize on Friday's modest bounce and came under aggressive selling pressure on the first day of a new week. Investors remain concerned that the energy crisis in Europe could drag the region's economy faster and deeper into recession. The Eurozone is also facing the risk of broadening fragmentation amid the recent sharp rise in borrowing costs of more indebted countries because of the European Central Bank's tightening plan. This was seen as a key factor that weighed heavily on the shared currency. This, along with the emergence of aggressive US dollar buying dragged the major to its lowest level since December 2002, closer to the parity mark. In fact, the USD Index soared to a fresh two-decade high during the Asian session on Tuesday and continued drawing support from hawkish Fed expectations. The market seems convinced that the US central bank would stick to its faster policy tightening path to combat stubbornly high inflation. The bets were reaffirmed by the FOMC meeting minutes released last week, which indicated that another 50 or 75 bps rate hike is likely at the July meeting. Policymakers emphasized the need to fight inflation even if it results in an economic slowdown. Apart from this, the prevalent risk-off environment boosted the safe-haven buck and exerted additional downward pressure on the EUR/USD pair. The market sentiment remains fragile amid worries that a more aggressive move by major central banks to curb soaring inflation would pose challenges to global economic growth. Furthermore, the ongoing Russia-Ukraine war and a fresh COVID-19 outbreak in China have been fueling recession fears. This, in turn, forced investors to take refuge in traditional safe-haven assets and further benefitted the buck. Tuesday's economic docket features the release of the German ZEW Economic Sentiment Index, which might do little to provide any impetus to the EUR/USD pair. Nevertheless, the fundamental backdrop supports prospects for an extension of the well-established bearish trajectory. Technical outlook From a technical perspective, the RSI (14) on the daily chart is already flashing extremely oversold conditions. This makes it prudent to wait for some near-term consolidation or modest rebound before positioning for any further losses. Hence, any further decline below the 1.0000 psychological mark is more likely to find decent support near the lower end of a multi-month-old descending channel, currently around the 0.9980 region. Some follow-through selling would be seen as a fresh trigger for bearish traders and make the EUR/USD pair vulnerable. On the flip side, any attempted recovery could be seen as a selling opportunity near the 1.0070 region. This, in turn, should cap the EUR/USD pair near the 1.0100 round-figure mark. The latter should act as a pivotal point, which if cleared decisively could trigger a near-term short-covering bounce. Spot prices could then climb back to the next relevant hurdle near the 1.0180-1.0185 zone.