NZD/USD: holds the 0.74 handle with further upside potential, 0.7480 eyed

Currently, NZD/USD is trading at 0.7403, up 0.08% on the day, having posted a daily high at 0.7408 and low at 0.7395.

NZD/USD is oscillating around 0.74 the figure as we head towards the final Tokyo open for this week. The bird has been elevated and better bid since the double bottom off 0.7201 on the 10th July. Broad based dollar weakness has contributed to the rise in the New Zealand currency, with traders taking bets off from the table that the Fed will indeed be in a position to hike rates again until at least December of this year. 

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However, fundamentally, the dollar's edge at the start of the year was the Trump trade, and that too has come under scrutiny with reflation expectations that have been dashed by the Senate legislative failure on health care and sentiment on near term growth has eased, as analysts at Westpac pointed out.

"But against that," the analysts added, "risks around the debt ceiling and a government shutdown in late September are elevated, not least because of disagreement in the White House, let alone in Congress. Treasury Secretary Mnuchin favours a clean debt ceiling increase, Budget Director Mulvaney favours cuts and other budget changes in exchange for a debt limit increase."

NZD/USD levels

Support: 0.7390, 0.7350, 0.7280, (11th July high), 0.7205/06 June 22/21 lows; 0.7186 June 15 low; 0.7150 June 5 high; 0.7127 June 6 low. On the wide, on a break below 0.7080/00 opens 0.6970. Resistance: 0.7415, 0.7480, 2nd Sep high.

"Longer term, if NZ-US yield spreads decline towards zero by year end, then NZD/USD should retreat to 0.70 or lower," explained the analysts at Westpac.