NZD/USD turns a blind eye towards breakdown in NZ/US yield differential

• 10Y NZ-US yield spread has turned negative.
• Kiwi reports marginal losses but trades well above the previous day's low of 0.7196.

The spread between the New Zealand and US 10-year government bond yields has turned negative for the first time since records began in the mid-1990s.

However, the Kiwi is showing little signs of stress. As of writing, it is trading at 0.7235 - down 0.10 percent and well above the previous day's high of 0.7196. Kiwi's resilience is not surprising, given the traditional FX market correlations have not worked since Q4, 2017.

That said, the spread may drop further in the NZD-negative manner if the Fed revises higher it's 2019 and 2020 dot plot this Wednesday.

NZD/USD Technical Levels

A move above 0.7275 (21-day moving average) would expose 0.7355 (March 13 high). A close higher would signal a bearish-to-bullish trend change and allow a stronger rally to0.7437 (Feb. 16 high). On the downside, breach of support at 0.72 (psychological support) could yield a sell-off to 0.7184 (200-day MA) and 0.7176 (Feb. 8 low).

10-year yield spread