NZ dollar pulled down by Aussie

The New Zealand dollar is sharply lower in the Tuesday session. NZD/USD is currently trading at 0.7102, down 1.07% on the day.

NZ dollar falls to 71 

The New Zealand dollar has taken a nasty spill on Tuesday. With no significant events to speak of out of New Zealand or the US, the slide appears to be a result of the Australian dollar’s woes today, as AUD/USD has dropped 1.2% today.

The Australian dollar took a tumble after the RBA formally removed its yield curve control of targeting the April 2024 Australian Commonwealth Government bond at 0.10%. This was a highly significant move as the yield curve control tool was a key pillar in the bank’s QE programme. Although this move made the bank less dovish, the markets nevertheless gave the Aussie a thrashing. By tossing in the towel on yield control due to pressure from the markets, the RBA has lost some credibility and will need to improve its communication with the markets, after folding like a cheap deck of cards over its bond target.

We could be in store for additional volatility from the kiwi with the release of New Zealand employment data later on Tuesday. With Employment Change for Q3 expected to slow to 0.4% down from the 1.0% gain in Q2, the New Zealand dollar could extend today’s sharp losses.

Over in the US, the Federal Reserve will announce its policy decision on Wednesday, with the Fed widely expected to taper its bond purchase programme. Fed Chair Powell will be sure to remind the markets that tapering does not mean that a rate hike is coming anytime soon, but for the markets, the guessing game will continue as to when the Fed might hike rates.

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NZD/USD Technical

• 0.7215 has some breathing room in resistance after NZD/USD dropped sharply. Above, there is resistance at 0.7259
• 0.7087 is under pressure in support and could be tested later today. The next support level is 0.7043

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