NZD/USD: Bears in control below key support area, eye bottom of rising channel

NZD/USD has been under pressure within the rising channel, sliding from a high of 0.6707 to a low of 0.6654, down -0.66% on the session, so far. Risks ahead amount to tomorrow's US Gross Domestic Product advanced reading. 

The bird has been beaten up on prospects of a dovish RBNZ cutting the OCR by 25bp to 1.25% on 7th August and signalling the potential for more, to underscore the market's spculation that the RBNZ is racing to the bottom and towards Qe next year. 

"We expect a follow-up cut in November to 1.0%, with a risk this is delivered in September, and the OCR ultimately falls below 1.0%. Domestic activity is weaker than the RBNZ had forecast," analysts at Westpac argued:

• Markets are pricing 20bp of easing in August, and 42bp by November, implying markets should fall further if our forecasts prove correct. 
• NZ-US yield spreads have explained much of the NZD’s recent gains, but they should soon become a headwind: markets have priced in plenty for the Fed (100bp) but arguably not enough for the RBNZ."

Technically, NZD/USD’s 3c rise since May looks corrective, and maybe giving way to a revisit of May’s 0.6500 low. Looking ahead, the next major events beyond tomorrow advance GDP reading come as the FOMC (31 July), RBNZ decision (7 Aug) and NZ employment data (6 Aug).

NZD/USD levels 

NZD/USD dropped below the 38.2% Fibo to a low of 0.6654, clearing out stops and advancing towards the bottom of the ascending channel and rising support line. A 50% retracement opens the 0.6630s ahead of the 61.8% around 0.66 the figure. A correction higher to the 23.6% Fibo would meet with prior resistances around 0.6715/20.