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NZD bounces off lows as treasuries calm and investor buy the dip

NZD - New Zealand Dollar

The New Zealand dollar bounced off Friday’s low through trade on Monday as turmoil across US treasuries eased and market demand for risk rebounded. Having fallen back below 0.73 and tested a break below 0.7230 the NZD marked intraday highs at 0.7290 before easing through the overnight session to open this morning at 0.727. Conditions across treasury markets have calmed allowing investors to buy the dip and begin recouping some of the losses suffered across the Friday’s sharp correction. While direction is currently being dominated by broader US dollar direction and risk plays we anticipate a push back toward 0.74 may be hard won. Having returned to recent ranges we see resistance on moves approaching 0.73 and 0.7350 with support intact on moves below 0.7230 and 0.7180. Our attentions turn to today’s RBA policy meeting as a key marker for bond market performance and the general risk narrative through the domestic session.

Key Movers

The Dollar index tracked lower through trade on Monday as action across treasuries eased and risk sentiment prompted gains across commodity currencies. Typical haven currencies tracked lower with the USD and JPY leading the downturn while the Euro softened as fears the ECB will weigh in if bond markets misbehave again forced the single unit back toward 1.2050. With price action largely tracking dollar demand risk appetite is again a key driver behind short term direction. With little of note on the macroeconomic docket ahead of Friday’s non-farm payroll print our focus remains on bond market activity and price action across treasuries as key markers of broader direction and risk demand. Further short-term uncertainty could prompt a deeper correction across bond markets and a flow on into risk currencies with the AUD and NZD testing 0.77 and 0.7230 respectively.

Expected Ranges

NZD/USD: 0.7180 - 0.7350 ▲

NZD/EUR: 0.5980 - 0.6110 ▲

GBP/NZD: 1.9080 - 1.9330 ▼

NZD/AUD: 0.9280 - 0.9420 ▼

NZD/CAD: 0.9150 - 0.9280 ▼