NZD/USD consolidates biggest daily fall since June above 0.6900 with eyes on RBNZ

NZD/USD refreshes intraday high with 0.6930 while snapping a two-day downtrend during Wednesday’s Asian session. The corrective pullback from the monthly low recently benefited from New Zealand’s Producer Price Index (PPI) data for the second quarter (Q2). However, the US dollar’s broad strength, due to the sour sentiment, joins the pre-RBNZ caution to probe the kiwi pair buyers.

NZ PPI Input jumped past 0.5% expected and 2.0% prior to 3.0% QoQ whereas the PPI Output figures also crossed 0.1% market consensus and 1.2% previous readouts to jump to 2.6% during the Q2 2021 period.

As the PPI data signals escalating price pressure inside New Zealand (NZ), odds of the Reserve Bank of New Zealand’s (RBNZ) rate hike increase, which in turn renew NZD/USD buying after the quote dropped the most in three months following Auckland’s first COVID-19 case.

In addition to the fresh coronavirus woes in NZ, fears of the US weekly cases to jump to 200,000, near January levels, joined the yearly peak of virus infections in Australia to magnify the pandemic woes and back the US dollar bulls. “New Zealand's Prime Minister Jacinda Ardern has announced a nationwide lockdown after the country confirmed one coronavirus case -- the first locally transmitted Covid-19 case in the community since February,” said the CNN.

Furthermore, a downbeat print of the US Retail Sales for July, -1.1% MoM versus -0.3% expected and +0.7% previous readouts, as well as geopolitical woes concerning Afghanistan, also portray the market’s pessimism and back the US dollar’s safe-haven demand.

Amid these plays, the US Dollar Index (DXY) jumped the most in a week to portray a two-day uptrend by the end of Tuesday’s North American session, steady around 93.13 by the press time. Also highlighting the risk-off mood is the 0.20% intraday loss of S&P 500 Futures at the latest.

Looking forward, NZD/USD traders will keep their eyes on the COVID-19 developments at home to gauge the RBNZ moves ahead of the event. Although broad market consensus favors a hawkish outcome, the latest Delta covid variant fears challenge the policy bulls. Following the RBNZ, monetary policy meeting minutes for the latest Federal Open Market Committee (FOMC) will also be important to watch for fresh impulse. Above all, risk catalysts are the key.

Read: Reserve Bank of New Zealand Preview: To hike or not to hike amid fresh covid lockdown

Technical analysis

A daily closing below 20-DMA, near the 0.7000 threshold, keeps directing NZD/USD bears to the 0.6900 round figure ahead of challenging the bears with the 61.8% Fibonacci retracement of August 2020 to February 2021 upside, close to 0.6860.