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The kiwi is today’s main underperformer after the NZ government announced a set of macroprudential measures and tax changes aimed at reducing speculation in NZ housing. NZD/USD fell sharply through key technical supports as a result, suggesting a solid technical case for more near-term weakness, Ned Rumpeltin, European Head of FX Strategy at TD Securities, briefs.

See:  NZD/USD  heads lower toward 0.70 as RBNZ rate hike expectations scale back – MUFG

Key quotes

“The NZD is today’s worst-performing major currency by a comfortable margin. This comes after the NZ government announced a set of macroprudential measures and tax changes aimed at reducing speculation in the local housing market. The move is seen as buying the RBNZ more time on potential rate hikes that might otherwise be needed to cool the sector. Policy expectations have repriced accordingly, with the market taking a full hike out of the curve.”  

“We have seen a decline through key support at 0.7105 “” a level that had also provided an effective base since late December. Together with the daily MACD pointing to increasingly bearish momentum, we think there is a strong technical case for more near-term weakness in the pipeline. We think the 0.7000/05 zone is now the next main target to the downside.”

“While it is too early to tell, the price action in NZD/USD could be sending an early signal that a larger move may be afoot. At a minimum, we think it is worth keeping a close eye on how things develop from here. We have turned strategically more neutral on the USD in recent weeks. These are slower-moving signals, however, and our read on positioning continues to favor a washout of residual USD shorts.”