NZD/USD: downside bias below 0.74 ahead of FOMC this week

Currently, NZD/USD is trading at 0.7427, down -0.38% on the day, having posted a daily high at 0.7458 and low at 0.7422.

NZD/USD has extended the drift from the double top and has made a recent lower low. There has been a modest rise in the greenback in the US session and yields have picked up. However, the broader picture stays with the Central Banks:

What to expect from the Fed this week - ING

This week will hold the FOMC, expected to stay on hold. "But markets will be particularly interested in the Fed’s thoughts on recent sluggish inflation readings, which has caused a large divide between the Fed’s rate hike projections (four hikes by the end of 2018) and market expectations (who are barely pricing one)," explained analysts at ING.

Meanwhile, the Q2 CPI disappointment strengthens the RBNZ’s case for remaining on hold this year and next, noted analysts at Westpac, however adding, "markets are still clinging to the view that the RBNZ will hike by August 2018...as long as the USD remains downtrodden, NZD/USD will remain elevated. If the USD eventually rebounds, as we expect, on Fed tightening, NZD/USD should retreat."

US: FOMC appears ready to start reducing the balance sheet - Nomura

NZD/USD levels

0.7460 was Friday's 10-month high while 0.7485 (the September high) remains the resistance thereafter. Supports are 0,7420, 0.7386, 0.7280, (11th July high), 0.7205/06 June 22/21 lows; 0.7186 June 15 low; 0.7150 June 5 high; 0.7127 June 6 low. On the wide, on a break below 0.7080/00 opens 0.6970. "Longer term, if NZ-US yield spreads decline towards zero by year end, then NZD/USD should retreat to 0.70 or lower," explained the analysts at Westpac.