NZD/USD sitting on key support, eyes 0.73 handle

Currently, NZD/USD is trading at 0.7230, up 0.03% on the day, having posted a daily high at 0.7234 and low at 0.7228.

NZD/USD is consolidated after meeting highs overnight at 0.7246 in an extension of the rally from 0.7140 and through and away from the aligning 20 and 50 smas on the 4-hour sticks. The US dollar index is around 0.2% lower on the back of Treasury Secretary Mnuchin commenting on the potential issuance if 50/100ye bonds that led to the underperformance in the long end yield curve. US 10yr treasury yields fell from 2.45% to 2.38%, while the 2yr fell from 1.22% to 1.19%. He also stated that tax reform will come by August as their aim. FOMC member Lockhart said the data supports 2-3 hikes this year. Kapaln said the Fed should move sooner than later. On the data front, Jobless claims were 244k (vs 240k expected), maintaining a tight path.

Meanwhile and domestically, at its February interest rate decision, the RBNZ kept the OCR on hold at 1.75% as fully expected, noted analysts at Westpac, adding, "With inflation expected to lift only gradually, we see a very low probability that recent OCR cuts will be reversed any time soon. Market pricing for a rate hike by end- 2017 had been 100% in the early weeks of 2017 but is now back to about 50/50."

NZD/USD outlook

For the day ahead, the analysts expect a neutral play in a 0.7130-0.7250 range unless the latter breaks. Longer term, the same analysts suggested that the Fed’s tightening cycle plus US fiscal expansion should maintain upside pressure on US interest rates and the US dollar, pushing NZD/USD down to 0.7000 or lower. "Granted, the NZ economy is strong and dairy prices have risen, but these forces are subservient to the US dollar’s trend."

NZD/USD levels

 NZD/USD has rallied and penetrated the 20 day sma at 0.7223 having rallied from the 50 sma on the same time frame at 0.7147. the move has broken the previous resistance of 0.7120 and 14th Dec highs of 0.7118. Placement here on a daily closing basis, the price 0.7300 as the psychological target. To the downside, 0.7080 guards 0.6950 and 20th July 2016 lows.

AUD/NZD correction could extend to 1.0600 area - Westpac