NZD/USD: within familiar ranges, capped below 0.6900 in US session

NZD/USD has been riding the commodity surge and a weakness sin the dollar over the last number od sessions, although the conviction and 0.69 handle has been lost from overnight trade. 

Forex today: risk driven by a surge in WTI, dollar takes another hit

NZD/USD made a fresh low last week, dropping below 0.6840 to 0.6817 the low. From that area, bulls regathered and a minor correction ensued until the 0.6920 resistance line. The moves are dollar-related in the near term with a hint of bullishness in WTI crude oil that was up 1.9% following Saudi Arabia and Russia’s commitment to extend production cuts, further denting the dollar's value. For the day ahead, we will be looking out for the GDT price index. This is the second auction in May and it is currently priced by futures to result in a modest decline in whole milk powder prices.

Meanwhile, NZD/USD remains inside a two-week old consolidation pattern roughly bounded by 0.6850 and 0.6950, as noted by analysts at Westpac. Their 1-3 month outlook is as follows:  "The Fed’s tightening cycle plus US fiscal expansion should maintain upside pressure on US interest rates and the US dollar, pushing NZD/USD below 0.6700 by year end. However, local factors are mostly supportive: a strong NZ economy, higher dairy prices, and higher inflation; but the RBNZ less convinced (15 May)."

NZD/USD levels

The 0.6820/30 area is the key level of support.  Below 0.6700 we have the 0.6675 level as the 29th May 2016 high. 0.6920/30 is the immediate resistance area. A break through the midpoint opens up the 0.7000 level. The 17th April highs of 0.7035 are next up ahead of 0.7060/70, being a further key resistance area through the 200-d ema (0.7037). The double bottom at 0.7130 as the mid-Feb lows could be a strong area of resistance.