NZD/USD sub-0.7200 handle as US yields rise

• The market’s focus is on rising US treasury yields which are underpinning the USD.

• The NZD/USD is trading below the important multi-month 0.7200 handle. 

The NZD/USD is trading at around 0.7160 down 0.70% on Monday. 

The US dollar is currently the strongest on Monday amongst major currencies and the NZD/USD is no exception. The US dollar bulls keep pushing amid higher US treasury yields, which is boosting the greenback.  

The 10-year treasury yields benchmark is at levels not seen since 2014 flirting with the 3.00% mark while the US Dollar Index is trading higher for its fifth day in a row with bulls setting their eyes now on the 91.00 mark.

Looking back, in early April, the NZD/USD had a boost (0.7200 to 0.7400 level) from upbeat comments from the Chinese President Xi Jinping, who discussed pushing for free trade and creating a better economic environment for foreign investments in China. Since China is a top trading partner with New-Zealand, the positive Chinese news affected the NZD. However, since then, the Xi Jinping’s comments were denied by a Chinese official who said that China was still ready for trade wars if necessary and last but not least the positive wave of sentiment on the US dollar collaborated to make the NZD/USD pair tank in mid-April. 

Later in the day lower-tier, Visitor Arrivals data in New-Zealand is unlikely to provide any change in the major underlying trend as the market is focusing on US dollar strength. 

Earlier in the day, the housing data came better than expected, the Manufacturing Purchasing Managers Index (PMI) came mainly in-line while the Chicago Fed National Activity Index (CFNAI) came below expectations. However, the tier-two data is largely overshadowed by the surge in US bond yields. 

NZD/USD daily chart

The short-term trend is bearish. Supports are seen at 0.7153, 0.7054 and 0.6954 swing lows while resistances are priced in at 0.7200 handle .7323 swing high and 7396 cyclical high.