NZD/USD Slightly Lower After Making Fresh Cycle Highs

NZD/USD has closed down 0.10% at 0.6246 after hitting new highs earlier in the session, the recent rally in the currency has been driven by a weakening USD and expectations that the Fed may begin easing monetary policy in September. Fed fund futures are currently pricing in 100bps of cuts into year-end roughly in-line with New Zealand when accounting for the cut that has already occurred.

• The NZD/USD is trading around the 0.6240 crucial support, showing signs of potential consolidation after its recent rally. Technical indicators suggest neutral momentum, with the RSI retreating from overbought levels although still elevated at 67, while the MACD indictor is printing decreasing green bars.
• Initial support is now 0.6200 with a break here then opening a move to 0.6075-6080 (50, 100 & 200-Day EMA). Initial resistance is now 0.6255 (Aug 28 highs) a break above here would open a move to 0.6285 (Jan 4 highs) above here 0.6359 (Jan 1 highs).
• New Zealand central bank bought a net NZ$3 million in July - BBG
• RBNZ dated OIS is little changed at the October meeting at 33bps, while we have firmed 6bps in the November meeting to 81bps.
• The NZ-US 2yr swap spread was little changed on Wednesday at -11.5bps
• Expiries: There is little in the way any large option strikes heading into month-end. While early September we have 0.5800 ($874.48), 0.582 ($838.21m), 0.5930 ($687.86m), 0.597 ($667.76m) for Sept 3.
• Today, ANZ Business Confidence & Activity Outlook at 11:00 AEST / 9:00 HKT