NZD/USD technical analysis: 50% of the recent drop erased, NZ-US yield spreads rise

NZD/USD has recovered 50% of the recent drop.
The Asian session gains are backed by rising NZ-US yield spread.

Omkar Godbole FXStreet Contributor

NZD/USD is solidly bid this Thursday morning in Asia, courtesy of the US Federal Reserve's dovish forward guidance on interest rates and the resulting rise in the New Zealand (NZ)-US bond yield differentials.

The currency pair is currently trading at 0.6568, representing 0.50% gains on the day, having hit a high of 0.6582 earlier today. More importantly, the Kiwi has retraced nearly 50% of the drop from the June 7 high of 0.6681 to the low of 0.6487 seen on June 14.

The uptick is backed by the NZD-bullish developments in the bond markets. For instance, the spread between the yields on the 10-year NZ and US government bonds is currently seen at -41 basis points – up 7 basis points from Wednesday's low of -0.47 basis points.

Looking forward, a break above 0.6681 is needed to confirm a bearish-to-bullish trend change.

Daily chart

Trend: Bullish reversal above 0.6681

Pivot levels

1. R3 0.6613
2. R2 0.6588
3. R1 0.6563
PP 0.6538
1. S1 0.6513
2. S2 0.6488
3. S3 0.6463

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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