NZD/USD struggles around 0.6700 with eyes on geopolitics, RBNZ

• NZD/USD portrayed three-week uptrend even as bulls slowed down near monthly top.
• NZ government bond’s inclusion to global bond index, hopes of hawkish RBNZ keep Kiwi pair buyers in command.
• Pre-RBNZ caution, geopolitical fears surrounding Russia, Ukraine challenge Antipodeans.
• PBOC Interest Rate Decision, Fedspeak will decorate calendar, risk catalysts are the key for fresh impulse.

NZD/USD justifies Friday’s gravestone Doji around the monthly top, as it struggles to regain 0.6700 during the early hours of Monday’s Asian session. Even so, the kiwi pair seesaws near the monthly peak after posting three consecutive weekly gains.

That being said, the quote’s recent pullback could be linked to the broad fears of the Russian invasion of Ukraine, as well as worsening covid conditions in New Zealand.

The West warns of an imminent Russian attack over Kyiv and many other cities even as Moscow denies the allegations. As per the latest updates from a Reuters’ witness, an explosion was heard in the center of rebel-held city of Donetsk in eastern Ukraine. It’s worth noting that a diplomatic meeting between US Secretary of State Antony Blinken and Russian Foreign Minister Sergei Lavrov is the ray of hope to witness de-escalation of the geopolitical fears and hence keep NZD/USD bears in check.

Elsewhere, New Zealand’s record covid cases also weigh on the NZD/USD prices. As per the latest covid update from NZ Herald, “Some 1799 of yesterday's 2522 new cases were in Auckland, but cases are growing rapidly in other areas.” The news also mentioned, “But despite a record number of cases and hospitalizations yesterday, Prime Minister Jacinda Ardern will this afternoon shed some light on what public health measures could look like in the future once the country has got through the Omicron peak.”

Other than the geopolitical and covid, cautious mood ahead of Wednesday’s Reserve Bank of New Zealand (RBNZ) monetary policy meeting also challenge NZD/USD traders as some in the market have hopes of a 0.50% rate hike, versus a general view of 25 basis points (bps) of a lift.

Alternatively, a pullback in the US Treasury yields from multi-day high and New Zealand government bond’s inclusion to FTSE Russell World Government Bond Index keep NZD/USD buyers hopeful, not to forget hawkish hopes from the RBNZ. “Now that the local market is in the benchmark global index, New Zealand fixed income securities are expected to enjoy higher prices and greater liquidity as fund managers who track the index (with trillions of dollars) buy NZ government bonds,” said analysts at ANZ.

Given the cautious mood and a lack of major data/events on Monday, NZD/USD prices may consolidate recent gains based on chart and candlestick patterns if the risk aversion wave extends.

Technical analysis

NZD/USD portrayed a gravestone Doji bearish candlestick formation on the daily chart. Also adding to the odds of a pullback is the quote’s U-turn from the 50-DMA, around 0.6730 by the press time. However, an upward sloping trend line from January 28, close to 0.6630, will be a tough nut to crack for the pair sellers.