NZD/USD technical analysis: 50% of the recent drop erased, NZ-US yield spreads rise

• NZD/USD has recovered 50% of the recent drop.
• The Asian session gains are backed by rising NZ-US yield spread.

NZD/USD is solidly bid this Thursday morning in Asia, courtesy of the US Federal Reserve's dovish forward guidance on interest rates and the resulting rise in the New Zealand (NZ)-US bond yield differentials.

The currency pair is currently trading at 0.6568, representing 0.50% gains on the day, having hit a high of 0.6582 earlier today. More importantly, the Kiwi has retraced nearly 50% of the drop from the June 7 high of 0.6681 to the low of 0.6487 seen on June 14.

The uptick is backed by the NZD-bullish developments in the bond markets. For instance, the spread between the yields on the 10-year NZ and US government bonds is currently seen at -41 basis points – up 7 basis points from Wednesday's low of -0.47 basis points.

Looking forward, a break above 0.6681 is needed to confirm a bearish-to-bullish trend change.

Daily chart

Trend: Bullish reversal above 0.6681

Pivot levels