NZD/USD bulls step in to stabilise the daily bear trend

NZD/USD is currently trading at 0.7112 between a range of 0.7096 and 0.7139, lower by some 0.18% on the day as the greenback holds its own.

It was a quiet day owing to the Martin Luther King Jr Day holiday in the US and risk appetite was mixed in Europe. The Euro Stoxx 50 rose 0.1% and the FTSE 100 was down 0.2%. 

Meanwhile, the greenback strengthened for a third consecutive day on Monday, reaching a four week high, as risk aversion swept through currency markets, knocking the antipodeans lower. 

The US dollar retained its firmer tone ahead of former Fed Chair, Janet Yellen’s, Senate confirmation hearing as US Treasury Secretary tomorrow and President-elect, Joe Biden’s, inauguration on Wednesday.    

Major currencies remain within established ranges, watching carefully the new administration's stance on the currency. 

However, looking into the first 100 days of Biden’s administration the focus will be on rolling out the vaccine and providing economic stimulus. 

Both are consistent with a weaker USD. Therefore, NZD weakness may only be temporary. However,  the Kiwi dollar appears in a more fragile state compared to its peers AUD and CAD.

It dropped 1% this last week in a chopper risk environment and the possible unwinding of some speculative long positions that (according to CFTC data) were at +26% of open interest on 5 January, the highest in G10. 

Negative rates have been fully priced out at this juncture, but the Consumer Price Index for the fourth quarter could offer some grim reading for which investors will want to reconsider bets on the Reserve Bank of New Zealand's stance.