The New Zealand dollar continued its decline against the firm US dollar in Europe from the intraday high of 0.6640 to the initial support level of 0.6570 (-70 pips) just before the NY session. The US dollar gains as the Chinese yuan's fall in the past 3 days slowed. Thus, easing many market concerns of China's actions to devalue their currency was going to continue and can potentially lead to a global currency war. Both the Australian Dollar and New Zealand dollar have been vulnerable to the fall of the yuan, since China is the largest trading partner of both countries. The aussie in particular, is often called a proxi currency.
Early in the prior Asian session, a rumor circulated that the PBOC's intention was to depreciate the yuan by 10% to gain a competitive advantage on China's exports. The PBOC Vice Governor Yi Gang said the rumor was groundless. (despite a higher USDCNY reference rate fix at 6.4010 from 6.3306 yesterday). Yi Gang said there wass no basis for a continued yuan depreciation and that there is ample reserves to support the yuan. The PBOC statement gave relief to the volatile market and alleviated concerns of a global currency war. One economist pointed out that it is not a currency war if the depreciation if for fundamental reasons, judging from the the past weak economic data from China. (ie: declining exports, trade and inflation data).
The kiwi dollar fell another 20 points from 0.6570 to 0.6550 as the US dollar gained at the NY open following the upbeat number of the U.S. July Retail Sales +0.6% versus the +0.5% median forecast. The next support levels of the NZDUSD are: 0.6535, 0.6520, 0.6480. Resistance levels: 0.6580, 0.6600, 0.6620, 0.6638. (see the downward channel formation).
Chart: WorldWideMarkets Alpha Trader