NZD/USD slips back under 0.6800, eyes post-RBNZ lows above 0.6750 as buck strengthens across the board

• NZD/USD has slipped back under 0.6800 and is eyeing Wednesday’s post-RBNZ lows near 0.6750 amid broad US dollar strength.
• Concerns about peak RBNZ hawkishness despite the bank’s 50 bps hike on Wednesday are weighing on the kiwi.
• Short-term bears are eyeing a test of the March lows near 0.6725.

NZD/USD has slipped back below the 0.6800 level since the start of US trade and is eyeing a test of Wednesday’s post-RBNZ lows just above 0.6750. The US dollar is on the front foot across the board after the latest batch of US data (Retail Sales and Michigan Consumer Sentiment results) failed to dent the narrative of US economic strength and commentary from influential FOMC member and NY Fed President John Williams threw his support behind 50 bps rate hikes at coming Fed meetings.

The pair’s most recent US dollar-driven downturn has seen it not only relinquish its grip on the 0.6800 level but also slip back under its 50-Day Moving Average just above it. Even though the RBNZ hiked interest rates by 50 bps on Wednesday to solidify its position as the most hawkish central bank in the G10, the kiwi failed to derive lasting impetus.

Traders pointed to a pullback in RBNZ tightening bets further out, which they said indicated growing concern about how central bank tightening would impact the New Zealand housing market and economy. Analysts at Capital Economics said “the market reaction suggests that investors are already starting to think about the end of the tightening cycle.”

"We think higher rates will bring down house prices and lead to an economic slowdown, so we would not be surprised if expected interest rates struggle to rise much further,” they added. If expectations regarding RBNZ tightening have now peaked, but continue to rise in the US, that could be a bearish recipe for NZD/USD. In the near term, traders will be looking fr a test of March lows in the 0.6725 area.