NZD/USD - Selling gathers steam as NZIER revises inflation forecasts lower

The downward revision of the inflation forecasts by the NZIER seems to have exacerbated the weak tone in the NZD/USD, pushing the spot to a session low of 0.7226. 

The kiwi began the day on a weak note as North Korea inaction forced investors to unwind the USD shorts and safe haven longs initiated on Friday.  The downward revision of the inflation forecasts only added fuel to the pair. 

The spot clocked a high of 0.7337 on Friday before falling below the 5-DMA level of 0.7231 this Monday morning in Asia. 

Yield spread does not support NZD/USD rally

• The rally from the August 31 low of 0.7131 to Friday's high of 0.7337 was not backed by a widening NZ-US 10-year yield spread. 
• The yield differential or the spread has narrowed from 82 basis points [bps] to 70 basis points. 

NZD/USD Technical Levels

At press time, the spot traded at 0.7230. A break below 0.7210 [61.8% Fib of Aug 31 low - Sep 8 high + 10-DMA] could yield a drop to 0.7172 [Sep 7 low], under which a major support is seen at 0.7136 [200-DMA]. On the other hand, a break above 0.7262 [session high] would open up upside towards 0.7299 [Aug 29 high] and 0.7337 [Sep 8 high].