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The kiwi is the lead gainer today as RBNZ rate hike expectations continue to gather pace, with AUD/NZD extending to the downside to its lowest levels since February.
I would expect the low at the time @ 1.0540 to be tested with further downside potential to follow on a break, targeting the December lows @ 1.0418-23. The monetary policy and economic divergences are still a key driver backing that conviction.
Risk sentiment continues to look more weary and cautious, which could lead to some additional retracement after having flirted with fresh all-time highs in US stocks earlier this week. As such, commodity currencies could have the propensity to underperform against the dollar - particularly USD/CAD, as it approaches its 200-day moving average.
The bond market is also still one to watch as Treasury yields hold a minor bounce off 1.30% for now but could be pressured lower once again as the bid in bonds has been something persistent despite a slew of more positive US data points.
I reckon we might get more of the same from the retail sales report later and if that disappoints, yields may slide and that could cause some degree of risk aversion.
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