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Rate Differentials Retreat From Cycle Highs Ahead Of Fed Meeting

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NZD/USD is ~2% lower since briefly dealing above its 200-Day EMA on Friday. The SVB inspired rate volatility saw NZ-US rate differentials, observed via 2 year swap rates, print a cycle high before moderating this week.

  • Rate differentials now sit at +74bps, having dealt as wide as ~120bps last week. This comes ahead of the Fed's meeting, with a full 25bps hike not priced in (close to 21bps implied by OIS markets).
  • NZD/USD has fallen below the 20-Day EMA and sits a touch below the $0.62 handle in early dealings today.
  • Bears now target 2023 lows at $0.6085, a break through there opens up $0.60 round number support, see the chart below.
  • Bulls first look to break 200-Day EMA ($0.6264) to turn the tide.

Fig 1: NZD/USD Daily Spot, EMAs

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NZD/USD is ~2% lower since briefly dealing above its 200-Day EMA on Friday. The SVB inspired rate volatility saw NZ-US rate differentials, observed via 2 year swap rates, print a cycle high before moderating this week.

  • Rate differentials now sit at +74bps, having dealt as wide as ~120bps last week. This comes ahead of the Fed's meeting, with a full 25bps hike not priced in (close to 21bps implied by OIS markets).
  • NZD/USD has fallen below the 20-Day EMA and sits a touch below the $0.62 handle in early dealings today.
  • Bears now target 2023 lows at $0.6085, a break through there opens up $0.60 round number support, see the chart below.
  • Bulls first look to break 200-Day EMA ($0.6264) to turn the tide.

Fig 1: NZD/USD Daily Spot, EMAs

Keep reading...Show less