NZD/USD - Doji candle, bond yield spread drops

NZD/USD daily chart shows Doji candle, which highlights indecision in the marketplace despite a convincing break above the 200-day moving average on Oct. 13.

At the time of writing, the currency pair was trading flat lined around 0.7165 levels. The offered tone could remain intact as the New Zealand-US 10-year bond yield differential is losing height

Yield differential

• The spread or difference currently stands at 62.5 basis points (bps); the lowest level since October 6.

The narrowing yield spread indicates the markets are not convinced by the hawkish case put forward by the strong NZ inflation data released this week. HSBC Global Research team writes, "rising food and petrol prices have supported inflation, but non-tradable inflation is also gradually picking up".

The Kiwi's struggle to rally above the 200-DMA indicates investors may want to see evidence of pick up in core inflation.

NZD/USD Technical Levels

An end of the day close today below 0.7147 (previous today's low) would confirm bearish doji reversal and shall open doors for a drop to 0.7122 (10-DMA) and 0.71 (zero levels). On the other hand, a break above 0.7178 (session high) would open up upside towards 0.7207 (previous day's high) and 0.7222 (50-DMA).