NZD/USD dips below 0.72 as NZ bond yields extend losses

NZD/USD hit a fresh session low of 0.7196 as the New Zealand government bond yields extended losses to trade ten basis points lower on the day. 

RBNZ’s McDermott cheers NZD sell-off

RBNZ Assistant Governor John McDermott said the ‘Market's reaction (NZD sell-off) to rate decision "was exactly what we wanted”. The central bank published a dovish interest rate forecast, which was a surprise given the markets had positioned for 1-1/2 rate hike over the next one year or so. 

The NZ 2-yr yield and 10-yr yield were down 5 basis points following the RBNZ rate decision. As of now, both are down ten basis points. Meanwhile, the US counterparts are trading flat lined. The narrowing of the NZ-US yield spread is weighing heavily over the Kiwi. 

NZD/USD Technical Levels

The spot was last seen trading around 0.72 handle. A break below 0.7180 (38.2% Fibo of Dec 23 low- Feb 8 high) would expose 100-DMA at 0.7142, under which the psychological figure of 0.71 could be put to test. On the higher side, beach of hurdle at 0.7223 (Jan 26 low) would shift risk in favor of a re-test of 0.7243 (Feb 1 low) and 0.7255 (23.6% Fib).