The Kiwi has entered a phase of downside consolidation, as we head into early European trading, with the bulls unlikely to find any respite sooner amid looming uncertainty over New Zealand election.
NZD/USD back to test 0.72 handle?
The Kiwi eroded almost 80-pips rapidly after the outcome of New Zealand’s election showed that the ruling National Party won the most seats, but failed to secure enough to form government. Hence, PM Bill English would now have to form a coalition government, which could weigh down on the NZD, as it would take week to form a joint government.
Moreover, broad based US dollar strength amid divergent monetary policy outlooks between the Fed and RBNZ, especially after last week’s hawkish surprise delivered by the Fed, also collaborated to the downside in the major.
Looking ahead, markets eagerly await the RBNZ policy decision for the next direction. In the meantime, the speeches by a bevy of FOMC members combined with the US GDP and durable goods data will be also watched for fresh incentives.
NZD/USD Levels to consider
NZD/USD tested 20-DMA at 0.7261, with 0.7200 (round number) still guarding 0.7159 (200-DMA) and a break back below 0.7132 (Aug lows) are key near-term downside areas. To the topside, a test of 0.7292/94 (100, 50 & 10-DMA) due on the cards, which could open doors towards 0.7312 (5-DMA).
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