• NZD/USD extended downside on Thursday as dollar was supported by an extended rise in US Treasury yields.
• Data on Wednesday showed US inflation rose less than expected in August, while price pressures were revised lower for the prior month.
• The data reduced expectations of a rate hike in October, with markets pricing in a 36% chance, down from 45% before the release. Traders, however, still see an 89% probability of an increase in December.
• The yield on benchmark US 10-year Treasury notes hit 5.306%, the highest level since mid-June 2007, while the 30-year Treasury yield was at 5.634%.
•Markets remain convinced that the Reserve Bank of New Zealand will need to tighten policy further, but expectations are divided over whether the next rate hike will come at the October 28 meeting, with the probability currently at 58%.
• Immediate resistance is located at 0.5647(Daily high), any close above will push the pair towards 0.5705(38.2%fib)
• Support is seen at 0.5610(23.6%fib) and break below could take the pair towards 0.5575(Lower BB).
Recommendation: Good to sell around 0.5620 with stop loss of 0.5700 and target price of 0.5520
