New Zealand Dollar gathers strength above 0.5800, all eyes on US CPI inflation data

The NZD/USD pair rises to around 0.5835, snapping the four-day losing streak during the early European trading hours on Friday. However, the potential upside for the pair might be limited as markets turn cautious ahead of the key US Consumer Price Index (CPI) inflation data later on Friday. 

Markets pushed the probability for a US rate increase to 70% following a report showing increasing Producer Price Index (PPI) in August, according to the CME FedWatch tool. 

Traders will take more cues from the US CPI data later in the day. This report will be the last piece of the inflation puzzle the Federal Reserve (Fed) will get before making its decision on interest rates next week. The headline CPI is expected to show a rise of 3.4% in August, while the core CPI is projected to show an increase of 2.4% during the same period.

The Reserve Bank of New Zealand (RBNZ) delivered a dovish rate hike, raising the Official Cash Rate (OCR) by 25 basis points (bps) to 2.75%. The New Zealand central bank said that the current rate remains accommodative, and the bank is focused on a "gradual removal of monetary stimulus". 

Economists widely expect at least one more rate hike before the end of the year, likely in December. The RBNZ’s cautious tone and forward guidance have dampened market expectations for an aggressive tightening cycle, which could weigh on the Kiwi. 

Technical Analysis: NZD/USD remains capped below the 100-day SMA

In the daily chart, NZD/USD holds a bearish near-term bias as spot remains capped beneath the 100-day simple moving average (SMA) and the Bollinger mid-line. The Relative Strength Index (14) around 43 leans toward weak downside momentum rather than oversold conditions, suggesting sellers still have the upper hand unless price can reclaim the nearby moving average resistance.

On the downside, initial support is aligned with the lower Bollinger band at 0.5800; a clear break below this zone would open the door to a deeper slide toward prior lows beyond the current dataset. On the topside, immediate resistance is located at the 100-day SMA at 0.5842, followed by the Bollinger mid-line near 0.5900, with the upper band around 0.6000 acting as a more distant barrier that would need to give way to neutralize the prevailing bearish tone.