NZD/USD: downside playing out below 4hr 50 sma

NZD/USD's upside has been capped on a stronger dollar towards the end of last week and the downside continues to play out as we head through Asian markets towards the climax for the US dollar at the end of this week.

NZD/USD has made fresh lows after a bearish start in early Asia from the open's bearish gap to lows of 0.7243 where recoveries were capped at 0.7267 before more supply came in the kiwi down to recent 0.7229 lows. The markets have backed the bid in the greenback, but it may not be long before the tide turns as markets look forward to what could be a troublesome set of GDP numbers at the end of the week while Yellen also speaks at the Jackson Hole. For now, remarks from Williams and Dudley have fueled a bullish tone in the US dollar. 

NZD/USD 1-3 month outlook - Westpac 

Analysts at Westpac explained that the RBNZ's easing cycle combined with the Fed tightening in December should push the NZD lower towards 0.70 by year end, although recent BOE and BOJ easing have made the NZD even more attractive to global investment flows such that a break above 0.74 is possible first.

"NZ swap yields 1 day: NZ 2yr swap rates should open up 1bp at 1.98, while the 10yr should open up 2bp at 2.44%. NZ swap yields 1-3 month: Slightly lower, explained the analysts adding, "The OCR is likely to be cut to 1.75% in November. That should result in a 2yr swap rate of around 1.90%, although the risk is it could be lower if markets expect a 1.5% terminal OCR."

NZD/USD levels

NZD/USD spot has dropped below the 50 sma on the 4hr sticks at 0.7240, offering a bearish bias towards 17th Aug lows of 0.7203 and 15th Aug 0.7190 lows as a key support area. 0.7163 is where the 200 sma on the same time frame is located and a break there opens an advance to challenge the rising channels support of 0.7080. To the upside, 0.7337 was the recent 8th August high.