The USD continues to move higher today, and the NZDUSD is not missing out on the run higher.
A chief fundamental catalysts is the the 10-year note yield which is up 10.5 basis points on the day and now up around 55 basis points since the Fed cut. The 2-year yield is up 45 basis points. Banks – not averse to jumping on the higher yield bandwagon despite stellar earnings – has taken the 30 year mortgage up 71 basis points leading the charge to the upside. Maybe JPMorgan will reach and exceed its Net Interest Income targets after all.
For the NZDUSD, the RBNZ cut 50 basis points at its last meeting. Of course, the Fed also cut by 50 basis points and although they are recalibrating, the data continues to be better. The Fed is still expected to cut by 25 basis points (85% chance for a 25 cut), it was at one point pricing a better chance for 50 basis points. Now there is a 15% chance for no cut.
Technically, the pair spent most of last week below its 200-day MA (green line) currently at 0.60902. After reaching lower and to the the high of a swing area at 0.60313 and 0.60387, the price moved higher into the Friday close.
Today, after first moving modestly higher to 0.6083 (on China stimulus news), the buyers turned back to sellers. The fall took the price to – and then through – the 61.8% of the range since August at 0.60509. More recently, the price has now dipped below the aforementioned swing area betwene 0.60313 and 0.60387.
What next?
More momentum to the downside would have the pair moving toward another swing area base from the early to mid-August trading period. That area comes between 0.5970 to 0.59836.
What would take some of the wind out of the seller’s sails?
A move back above the broken 61.8% level at 0.60509.
