NZD/USD correcting bearish opening gap towards 0.7000 key level
NZD/USD is currently trading at 0.7027, recovering from the opening bearish gap down to 0.7009 from last week's close of 0.7040.
Economic wrap: Fed Chair Yellen rubber stamped a March hike - Westpac
In summary of last week's closing session in the US, Fed Chair Yellen was the key event after a strong of hawkish speakers from the previous session. In her speech, Yellen signalled that a March hike was likely. The dollar was bid initially but actually closed lower by 0.7% due to her signalling that rate rises would only be gradualism beyond March. As a result, US interest rates peaked moments after the speech, falling into the close down to 2.48% from London highs of 2.52%.
In respect to the bird, last week was a poor week for bulls with the kiwi dropping to test commitments at the 0.7000 level after failing for a triple top formation at 0.7246. For data today, NZ building permits MoM beat expectations for the month of January arriving at 0.8% vrs the -7.9 consensus.
Analysts at Westpac explained that the bird has reached their medium-term target of 0.7000 but noted that momentum remains strong, indicating the potential for further downside to 0.6970 next.
Weekend news wrap: Trump, European politics/banks and China
NZD/USD 1-3 month:
The analysts explained that the Fed’s tightening cycle plus US fiscal expansion should maintain upside pressure on US interest rates and the US dollar, pushing NZD/USD down to 0.7000 or lower. Granted, the NZ economy is strong and dairy prices have risen, but these forces are subservient to the US dollar’s trend.
NZD/USD technical outlook from Westpac:
"Recent sharp rebounds and positive turns in weekly momentum suggest that a solid base has for 1Q’17 formed at 0.7145-60. Current rebounds remain within a tight uptrend but show signs of maturing above 0.7500, so forming an inter-week top. Daily momentum is high but not yet turning, so a top is still to be confirmed. The next decent move is likely to involve a test of the 0.6965-0.7000 area."