NZD/USD wobbles on dollar short-covering ahead of RBNZ

• NZD/USD stalling ahead of the RBNZ tonight. 
• Technical indicators warn of a sustained move to the upside.

NZD/USD has been capped on the 0.66 handle and the lack of extreme dovishness from Fed speakers today as given the dollar a much-needed boost in an otherwise bearish environment for the greenback. On the lead into the RBNZ which is expected to offer a dovish rhetoric instead of a rate cut, eyes will be watchful for further bullish signs on the USD leg of the cross which could lead to a prolonged correction to the downside. 

Fed's Bullard: 50 basis points rate cut in July would be overdone

The Federal Reserve is widely expected to cut interest rates in July, by at least 25bps, which is priced into the dollar. However, Federal Reserve's James Bullard stated today that a 50 bp cut would be a step too far too soon which has lifted the dollar significantly higher in recent trade. 

RBNZ outlook

Meanwhile, since the RBNZ kicked off its easing cycle earlier this year and before the pack, other central banks have indicated they will be following suit which has enabled the bird to catch up and rally from below the 0.65 handle this month. However, analysts at Rabobank argue that "while the NZD could find support on the announcement of steady policy" tonight, they expect such a move to be limited by dovish rhetoric from the central bank. "We remain bearish on the outlook for NZD/USD and look for a move towards 0.63 on a 12-month view."

NZD/USD levels

However, while the dollar may have found a bid, the technical indicators warn of a sustained move to the upside with the daily Chaikin Oscillator crossing above the zero-line as bulls take on the 50-day exponential moving average (EMA) in the sixth day of consecutive gains. The July 2018 double bottom lows around 0.6680 will should into play as a resistance, but above there, the 0.67 handle is up for grabs which meet the 200-D EMA at 0.6707. To the downside, the 21-day EMA is located at 0.6559 now, guarding 0.6510 and 0.6480.