Comparing NZ 10Y Yield with AU 10Y Yield we can see the divergence opening up. The local stories in NZ are looking a lot worse than in Australia for now, depriving the NZ 10Y Yield of completing the base formation.
On the currency side, the strategic link between AUD and NZD is being threatened by AUD breaking up and flirting to complete the leg towards 1.12 - something we have been tracking since June:
On the technical flows, the NZ10Y can sweep 0.5% comfortably, where it would be then able to replace the current defence with a more solid structure for a move back towards 1.0%. Thus the 🔑 to answering direction for NZ10Y comes only with more time elapsing.
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🔸 We must tread carefully here and recommend starting to trail the stops for those trading fixed income.