NZD/USD stuck in 20-pip range despite the Trump tax talk

Trump’s tax talk and the resulting spike in the US stocks, treasuries and US dollar has gone unnoticed as far as the NZD/USD pair is concerned. The spot has been largely restricted to a 20-pip range of 0.7180-0.72.

Bearish exhaustion

Kiwi dropped 100 pips in Asia/Europe after the RBNZ surprised markets with a dovish OCR forecast. Thus, the bears were taking a breather, hence the muted reaction to Trump’s tax talk. Moreover, there was plenty scope for a sharp recovery in the US dollar, especially against currencies like the Japanese Yen.

The pair was last seen trading around 0.7188 levels. The sharp rise in the Treasury yields in the North American session means the NZ-US yield spread narrowed further. Thus, the odds of a downside break from the 20-pip range are high.

NZD/USD Technical Levels

A bullish break from the 20-pip range would open doors for 0.7220 (measured height target + Jan 17 high), above which resistance at 0.7255 (23.6% of Jan 23 low - Feb 7 high) could be put to test. A violation there could yield a rise to 0.73 (zero figure).

On the other hand, a bearish break from the 20-pip range could yield a drop to 0.7160. Next major support is lined up at 0.7145 (Jan 12 high) and 0.71 (zero figure).