NZD/USD jumps over 30 pips to pierce 0.7000 as RBNZ signals tapering
|- NZD/USD takes the bids to reverse the weekly losses on hawkish RBNZ.
- RBNZ hints tapering by late July, keeps benchmark rate unchanged.
- Halt in US Treasury yields probe DXY bulls amid a quiet session ahead of Fed’s Powell.
- Covid headlines, US PPI also become important for fresh impulse.
NZD/USD shoots up to 0.7007, up 0.73% intraday around 0.7000 by the press time of early Wednesday after the Reserve Bank of New Zealand (RBNZ) portrays a hawkish tilt. Also favoring the quote could be the optimism of New Zealand PM amid the comparatively better covid conditions than other Asia-Pacific players.
The RBNZ kept the benchmark rate unchanged around 0.25% in its latest monetary policy meeting, matching wide market expectations. However, the interesting part was the comments suggesting, “Halt additional asset purchases under the Large Scale Asset Purchase (LSAP) program by 23 July 2021.”
Read: Breaking: RBNZ leaves official cash rate unchanged at 0.25% as expected
Earlier in the day, New Zealand Visitor Arrivals for May jumped past 1,785.7% expected to 2,531.6% YoY. The bulls also took clues from Reuters’ news saying, “New Zealand Prime Minister Jacinda Ardern said on Wednesday that a special meeting of leaders of the Asia-Pacific trade group APEC this week will discuss the global economic impact of COVID-19 and no major announcement is expected.” It’s worth mentioning that the hopes of witnessing hints to tapering and/or rate hikes during 2021 also backed the NZD/USD bulls before the event on Wednesday.
The moves, however, were in contrast to the previous day’s fall when the kiwi pair dropped to the fresh low since November on broad US dollar strength. The greenback benefited from firm inflation data on Tuesday. That said, the US Consumer Price Index (CPI) data for June. The headline inflation data rose past 4.9% expected to 5.4% YoY while the core reading was also upwardly revised from 3.8% to 4.5%.
It should, however, be noted that the US dollar index (DXY) bulls take a breather of late, likely due to the steady US Treasury yields after rising for the third consecutive day.
Amid these plays, S&P 500 Futures remain indecisive whereas the US 10-year Treasury yields drop 1.4 basis points (bps) to 1.4% by the press time.
Looking forward, the NZD/USD bulls may struggle until witnessing any further positive catalysts as Australia’s Sydney extends lockdown for two more weeks. Also likely to challenge the pair’s upside moves is the scheduled testimony from Federal Reserve Chairman Jerome Powell.
Read: Powell Preview: Three reasons to expect the Fed Chair to down the dollar
Technical analysis
A confluence of 21-DMA and a descending trend line from May 27, around 0.7005, becomes a short-term key hurdle for NZD/USD buyers before targeting the monthly top near 0.7110. Meanwhile, bears are less likely to get convinced until the quote stays beyond 0.6920, including multiple lows marked since June 18.
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