- The spread between the 2-year New Zealand and US bond yields continues to slide in the NZD-negative manner.
- Technically speaking, a failed bull breakout could have put the NZD on the path to re-test of the recent low of 0.6544.
For the NZD, the path of least resistance is to the downside, according to bond yield differentials.
At press time, the NZD/USD pair is trading at 0.6645 – down 0.15 percent on the day – having failed to capitalize on the upside break of the falling trendline drawn from the June 13 high and the July 26 high.
The spread or the difference between the New Zealand 2-year bond yield and the US 2-year treasury yield has hit a fresh record low of -99 basis points (bps).
The combination of the failed technical breakout and falling NZ-US yield differential indicates the NZD is more likely to revisit the recent low of 0.6544. Further, the escalating US-China trade tensions and Italy’s fiscal concerns could hurt the kiwi dollar.
NZD/USD Technical Levels
Resistance: 0.6662 (session high), 0.6682 (trendline hurdle), 0.6717 (previous day’s high)
Support: 0.6620 (Aug. 24 low), 0.66 (psychological support), .6544 (recent low)
Yield spread
Daily chart
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