NZD/USD breaks to yearly lows on strong USD demand

  • The 10-year Treasury yield benchmark is trading at a 7-year high spurring USD demand on Tuesday.
  • The NZD/USD is trading at yearly lows on strong US dollar demand.

The NZD/USD pair is trading at around 0.6861 down 0.75% on Tuesday.

The kiwi had a small bounce to 0.6925 in the early European session and then fell 70 pips to find an intraday floor just above the 0.6850 level and breaking to yearly lows.

The USD was strong on Tuesday as the 10-year Treasury yield benchmark traded at multi-year highs reaching 3.081% which is a level not visited since the summer of 2011. Investors are indeed getting out of bonds and equities which are considered riskier assets than the USD. Since the Fed is expected to raise rates three to four times in 2018, investors are indeed in a rush to buy the US dollar by selling other riskier assets such as those mentioned above.

Earlier in the day, the US Retail Sales came in mixed but the market kept buying USD on the back of rising yields.

Also indirectly adding extra-pressure to NZD is the strong bear breakout in gold, which fell below $1,300 a troy ounce and its 200-period simple moving average. The metal is now trading at fresh yearly lows. NZD is positively correlated to AUD which in turn is affected by gold prices.

NZD/USD 4-hour chart 

The trend is bearish and immediate support is seen at the 0.6850 psychological level close to the low of the day, followed by 0.6830 previous demand level. To the upside, resistances are seen at 0.6900 supply level and at the 0.7000 handle. The kiwi is trading below its 50, 100 and 200-period simple moving averages on the 4-hour chart suggesting a strong downward momentum.

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