NZD/USD: consolidates the heavy overnight supply from 0.7315

Currently, NZD/USD is trading at 0.7257, down -0.08% on the day, having posted a daily high at 0.7265 and low at 0.7256.

Overnight, NZD fell from yesterday’s peak of 0.7344 to 0.7248 while the dollar picked up a bid in a pre-Fed flush-out and dovish commentary from BoC's Lane who expressed concerns over higher rates and the Loonie.

Forex today: US dollar marginally better-off on pre-Fed flushout and return of risk appetite

US 10yr yields rose from 2.20% to 2.24% (a one-month high) and the Fed's fund futures yields continued to price the chance of a December rate hike at 56%, supporting demand for the US dollar and hitting the higher betas such as the antipodeans. 

Domestic risk events are limited now that Westpac's consumer survey has been released at 112.4 vs 113.4 prior. However, tonight, we have the GDT dairy auction that is priced by NZX futures to result in little change in the key whole milk powder price, according to analysts at Westpac. Broadly speaking, the RBA minutes could offer some activity in the commodity sector and the Kiwi, but the main event ahead stays with the FOMC in the middle of the week before the NZ elections on Friday, (or weekend, time zone dependent). 

NZD/USD 1-3 month: 

Analysts at Westpac explained that if the RBNZ remains firmly on hold, as we expect, and the US dollar rises on tighter Fed policy, then NZD/USD could fall as far as 0.70 by year end. "Pre-election jitters may also weigh on the NZD,' the analysts added.

NZD/USD levels

To the upside, 0.7280 guards the 0.73 handle. However, a break of 0.7320, then 0.7337 recent highs and lastly 0.7370 (9th Aug high) that are the next targets in the near term would solidify a bullish trend back to 0.7522 YTD highs.To the downside, 0.7220 guards 0.7195 as the recent low. 0.7127 is the June 6th low and 0.7100 is a key psychological level.