Is the NZD buying finally running into some exhaustion?
That may very well be the case as we see the kiwi keep to near flat levels against the dollar after an attempt to break higher earlier in the day.
NZD/USD hit a high of 0.6562 after the RBNZ gave two more years to banks to increase their capital buffer but in my view, the news was a bit-part catalyst during a period of low liquidity - in which kiwi buyers were just waiting to pounce.
The bigger picture view of the kiwi is that we are starting to see some green shoots in the economy and the RBNZ looks to remain sidelined for quite some time yet.
The challenge now is purely technical in my opinion with NZD/USD running into resistance from the 200-day MA (blue line) @ 0.6543 with the 61.8 retracement level @ 0.6567 also helping to limit gains for the time being.
But it is not just the case of one chart that is spoiling the party for kiwi buyers:
We're also seeing NZD/JPY run into a test of the 200-day MA with AUD/NZD also seen pulling back after trying to extend the downside momentum below the 1.05 level.
At this juncture, with price resting just below key technical levels, I reckon kiwi buyers are just waiting for some form of positive catalyst to give them the conviction they need to go chasing a break higher in the currency.
Otherwise, we could see some temporary exhaustion in the upside momentum over the next few sessions as buyers may take profit amid the lack of push to break the key levels pointed out above.
However, in my view, as long as there is some continued push lower in AUD/NZD - especially on talk of economic divergence - the kiwi will remain underpinned generally as long as the pair remains below the 1.05 level in the short-term.
