- The NZD/USD rose to one month high in overnight trade, demand for put options drops.
- Eyes global dairy trade auction, scheduled in the US session today.
The corrective rally in NZD/USD gathered steam as equity markets stabilized on Monday.
The pair rose to 0.7048 in overnight trade – its highest level since May 4 high and was last seen trading at 0.7032. The recovery from 0.6851 to 0.7048 is accompanied by a drop in demand for the NZD puts.
Currently, NZD/USD one month 25 delta risk reversals (NZD1MRR) are being paid at -0.7 vs -0.9 on May 30. The rise from -0.9 to -0.7 represents a drop in implied volatility premium for NZD puts or falling demand for NZD puts.
So, the corrective rally looks sustainable but seems to have stalled in Asia as China’s Caixin services PMI for May came in at 52.9 expected. Further, New Zealand Treasury warned that first-quarter GDP may miss estimate, leaving the Kiwi bulls unimpressed.
That said, NZD may pick up a strong bid if prices rise at tonight’s Global Dairy Trade (GDT) auction with Fonterra.
NZD/USD Technical Levels
The resistance is seen at 0.70559 (38.2% Fib R of April 13 high – May 16 low), 0.7094 (50-day MA), 0.7125 (200-day MA). Meanwhile, support is seen at 0.7006 (5-day MA), 0.6960 (June 1 low), and 0.6903 (May 10 low).
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