NZD/USD stays pressured towards 0.7100 amid USD rebound
- NZD/USD holds onto pullback from three-month top, edges lower of late.
- US dollar corrects higher despite holiday at home.
- New Zealand moves to alert level 2 ex-Auckland from 11:59 PM NZT tonight.
- China trade numbers, US traders’ return eyed for fresh impulse.
NZD/USD keeps the week-start pullback from early June’s high, holding lower ground near 0.7135 as Asian traders brush their screens for Tuesday. The kiwi pair snapped a six-day uptrend the previous day as the US dollar posted a corrective pullback despite an extended weekend in Canada and the US. In doing so, the New Zealand currency pair also ignored an announcement of easing virus-led alert levels outside Auckland.
US Dollar Index (DXY) took a U-turn from a one-month low, also roiling a four-day uptrend, while closing around 92.20 for Monday, up 0.10% daily. The greenback gauge consolidates recent losses as Friday’s US jobs report for August pushed back the concerns over the US Federal Reserve’s (Fed) tapering. Also positive for the DXY could be mildly bid equities and mixed covid scenario.
Although New York and Ottawa were closed due to Labour Day, European equities and US stock futures managed to post mild gains by the end of Monday’s trading. It’s worth noting that New Zealand’s 10-year Treasury yields brace for crossing the 2.0% limit.
Market’s cautious optimism could be linked to the receding odds of the global central bank’s run-up towards the monetary policy tightening as well as recently soft covid numbers from New Zealand. It should be noted, however, that China–Taiwan tussles and the long-standing Sino-American jitters challenge the mood while joining doubts over the economic challenges due to the Delta covid variant.
New Zealand Prime Minister Jacinda Ardern announced an easing of the virus-led alert level outside Auckland from level 3 to level 2 starting from Wednesday (local time) as the covid cases are stabilized around 100 per day and that too mostly from Auckland. “The alert level move came off the back of three days of cases hovering around 20 daily - well down on the peak of 84 just over a week ago. There are now 821 cases in the outbreak, including 804 in Auckland and 17 in Wellington,” said NZ Herald.
While the virus conditions and the US dollar moves should be watched closely for immediate directions, China trade numbers for August will decorate the economic calendar for Tuesday. Given the likely easing of trade deficit from $56.59B to $51.05B, NZD/USD has scope for recovery should the covid data arrive positive.
Also important is the Reserve Bank of Australia (RBA) monetary policy announcement as markets are divided over the Aussie central bank’s plan to cut weekly bond purchases. Should the RBA sounds hawkish, which is less likely due to the virus outbreak, NZD/USD buyers will have another reason to stay hopeful.
It should be noted that the US traders’ full-day reactions to Friday’s key jobs report will also be the key catalysts for the NZD/USD prices.
Technical analysis
Failures to cross a downward sloping trend line from late February around 0.7150, backed by overbought RSI conditions, drag NZD/USD prices towards 200-DMA around 0.7120.