NZD/USD hits fresh 3-month lows on dovish RBNZ McDermott

The offered tone behind the NZD keeps gathering pace as we head towards the European open, with the NZD/USD deep in the red at fresh multi-month troughs.

NZD/USD: more easing seen from RBNZ

Currently, the NZD/USD pair drops almost 1% to fresh three-month lows of 0.7062, after having met strong just ahead of 0.71 handle. The NZD/USD pair dived deeper in the red after markets almost priced-in a Nov rate cut, following RBNZ assistant governor McDermott’s outrightly dovish comments delivered earlier on the day.

Moreover, weaker oil prices and reduced demand for higher-yielding currencies in wake of more buyers for the US treasury yields, also weigh heavily on the NZD/USD pair. The yield differential between 10-year treasury yields and 10-year NZ government bond yields remain in favor of the USD, as divergent monetary policy outlooks between the Fed and RBNZ get more prominent.

All eyes now remain on the Fed speaks, China trade and CPI data due for release in  the week ahead, amid a lack of fresh macro news from the OZ economy.

NZD/USD Levels to consider

To the upside, the next resistance is located at 0.7100 (round figure), above which it could extend gains to 0.7142 (5-DMA) and from there to 0.7192 (10-DMA). To the downside immediate support might be located at 0.7040 (daily S3) and from there to at 0.7009 (200-DMA), below which 0.6955 (multi-month lows) would be tested.