NZD/USD drops below 0.65 for the first time since February 2016

• The NZD/USD pair fell to 0.6490 on Thursday, its lowest level since February 2016. Back then, the oil price crash was hurting the risky assets and commodity dollars likely the NZD.
• The sell-off in the NZD seen today is likely associated with the sharp rise in the treasury yields and due to EM crisis fears.

The NZD/USD pair fell to a 32-month low of 0.6490 in Asia, having dropped 1.19 percent yesterday.

The drop to multi-month lows is likely associated with the sharp rise in the treasury yields. For instance, the 10-year yield is currently trading at 3.18 percent – the highest level since July 2011 – and the 30-year yield is trading at a four-year high of 3.34 percent.

That the pick-up in the treasury yields is good for the US dollar is common knowledge. What is worth noting is that the sell-off in the emerging market currencies could worsen, courtesy of the sharp rise in the treasury yields and the demand for commodities will likely drop if the rout in EM currencies translates into economic crisis.

As a result, commodity dollars like the NZD and AUD have begun to follow the EM currencies. The Kiwi may extend the decline during the day ahead if the EM currencies continue to slide against the greenback.

NZD/USD Technical Levels

Resistance: 0.6501 (Sept. 11 low), 0.6544 (Aug. 15 low), 0.6580 (10-day EMA)

Support: 0.6428 (November 2015 low), 0.64 (psychological level), 0.6347 (January 2016 low)