NZD/USD testing 0.66 downside; driven back into its place?

NZD/USD testing 0.66 downside; driven back into its place?
FXStreet (Guatemala) – NZD/USD is currently trading at 0.6605 with a high of 0.6611 and a low of 0.6605.

NZD/USD rallied after the RBNZ cutting by 25bps and that further easing “seems likely”. But the short squeeze found resistance through 0.6680 and the bird has resumed the downside and is testing the 0.6600 level in early Asia.

The greenback was big overnight while the catalyst arrived when the jobless claims dropped to its lowest level since Nov 1973. Looking ahead we look out for HSBC Manufacturing PMI (Jul) from China tonight while New Home Sales data for June as well as Markit Manufacturing for July from the US comes at the end of the FX week.

In respect to the RBNZ, they were expected to cut by 25bps but there had been a slight consensus for a deeper cut of 50bps. Also, the CFTC report showed that NZD/USD futures speculative positioning was at a record lows, warning of a sharp short-squeeze eventually, which we may have just witnessed. The door is left open for further action for the rest of the year and Westpac economists have forecasted rates dropping as low as 2.00% by year end while the RBNZ shadow board forecasts 2.5% for the same time frame across September and December’s meetings.

NZD/USD technically contained to the downside

On the upside, analysts at Scotiabank explained that NZD/USD technicals are shifting due to the break above the 9 day MA (0.6609) and test of the 21 day MA (0.6693), providing confirmation of the turn in momentum indicators and near term risk appears biased to the upside to be confided of a break of 0.6720. For the downside, 0.6560 marks the triple bounce zone this week and 0.6498 15th July low and lowest levels since 2009 at the bottom of the bearish channel from 0.8834 July 2014.
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NZD/USD testing 0.66 downside; driven back into its place?
Source: FXStreet