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  • Kiwi fumbles following negative rate comments from RBNZ’s McDermott.
  • Morgan Stanley hedges their  long call with medium-term short warnings.

The NZD/USD tumbled into the 0.6900 handle today following dovish statements from the Reserve Bank of New Zealand’s (RBNZ) McDermott.

The Kiwi dumped from 0.6944 to below the 0.6900 level following comments from the RBNZ’s McDermott that mentioned the potential for negative cash rates. Kiwi traders recoiled following statements from the RBNZ that failed to rule out future ‘unconventional monetary policies’, without detailing what those might be.

With the NZD still trading closer to the bottom, analysts at Morgan Stanley are beginning to lean bullish on the NZD/USD, citing oversold technical indicators, though the medium-term outlook remains somewhat weak, with rising funding costs and widening interest rate differentials.

NZD/USD levels to watch

As noted by FXStreet’s Ross Burland on the Kiwi’s technical outlook, “Resistance at the 10-D SMA and 0.6850 below there. To the upside, 0.6950 and 0.6980 mark key levels of interest, (21-D SMA 0.6986). The next upside key target beyond there is located at  0.7080. The NZD/USD has taken out the 200-month moving average resistance at 0.6980. However, weekly technicals remain bearish and RSIs are biased to the downside. Below 0.6850, 0.6780 comes as next downside target meeting the lows of mid-Nov 2017.