NZD/USD: resting at the pivotal 0.69 handle, which way from here?

NZD/USD is currently subdued after the initial offer at the start of this week, opening at 0.6915 compared to the close of 0.6918.

At this moment in time, the bird is looking fairly neutral today in a 0.6850-0.6950 range according to analysts at Westpac who explained that the US dollar’s slippage plus a potentially upbeat RBNZ this Thursday are supportive factors.

NZD/USD 1-3 month:  

"The Fed’s tightening cycle plus US fiscal expansion should maintain upside pressure on US interest rates and the US dollar, pushing NZD/USD below 0.6700, added the analysts on a longer term outlook explaining, however, that local factors are supportive: a strong NZ economy, higher dairy prices, and an RBNZ which has finally met its inflation target.

Meanwhile, the DXY is actually on the back-foot despite a better than expected nonfarm payrolls headline. The wages factor remains a drag and US yields are still anchored relative to what the markets have been pricing in otherwise in expectations of the Fed increasing rates this and next year. 

In respect of the RBNZ, Thursday’s Monetary Policy Statement will address a challenge that the Reserve Bank hasn’t faced in many years, "not how to return inflation to the target, but how to keep it there," explained analysts at Westpac. "Headline inflation has reached the 2% mark much sooner than expected, though partly due to some temporary factors that will wane over the coming year. Still, measures of underlying inflation have also been picking up for the last year or so, which suggests that the RBNZ will need to move away from the current loose monetary policy settings at some point."

Economic wrap and key events ahead - Westpac

NZD/USD levels

0.6920 is the immediate resistance ahead of the and psychological 0.70 level. We then look to the 17th April highs of 0.7035. 0.7060/70 is a further key resistance area through the 200-d ema (0.7048). The double bottom at 0.7130 as the mid-Feb lows could be a strong area of resistance  To the downside, NZD/USD has the 0.6900 level as first support and today's lows at 0.6897 before 0.6850/60. Next key support below 0.6700 is down to 0.6675 as the 29th May 2016 high.