NZD/USD defends 0.7000 as RBNZ’s Hawksby battles risk-off mood

• NZD/USD probes bears after a sluggish start to the week, dribbles near the monthly low.
• RBNZ’s Hawksby sounds cautiously optimistic, NZ Westpac Consumer Survey drops for Q3.
• Fears from China’s distressed Evergrande, Fed tapering and virus cases outside Auckland weigh on Antipodeans.
• US Housing data, NZ Credit Card Spending to decorate calendar, risk catalysts are the key.

NZD/USD seesaws around 0.7030, grinds southwards after refreshing the monthly low the previous day. In doing so, the kiwi pair recently defends the 0.7000 threshold as the recent comments by Reserve Bank of New Zealand (RBNZ) policymaker conquers sour sentiment witnessed since the week’s start.

RBNZ Assistant Governor Christian Hawkesby spoke Tuesday morning in Asia entitled “A least regrets approach to uncertainty”. Like the title of the speech, the policymaker did convey the central bank’s least regret over the latest decisions while also mentioning, “August monetary policy statement noted we had more confidence that employment was at its maximum sustainable level.”

Read: RBNZ’s Hawksby: We had more confidence that employment was at its maximum sustainable level

Even so, risk-off mood weighs on the Antipodeans and the NZD/USD pair isn’t an exception. The main catalyst is the fears emanating from China as the country’s biggest real estate player Evergrande is up for default, with estimated dues of above $300 billion. The ripple effect has been severe for stocks and the US Treasury yields also consolidated some of the last week’s gains.

In addition to Evergrande's woes, Fed tapering concerns, doubts over the US stimulus and challenges over the economic recovery due to the coronavirus also weighed down the NZD/USD prices.

Despite recently mixed data, Fed policymakers were hawkish during their latest approach while the headlines figures weren’t too dismal and hence underpin the tapering tantrum. Further, chatters that a senior US Senator Joe Manchin pushed back President Joe Biden’s $3.0 trillion stimulus discussions back to 2022 joined doubts over the debt limit extension to exert additional downside pressure on the risk appetite. US Treasury Secretary Janet Yellen urged for another extension to the limits.

Elsewhere, New Zealand Prime Minister Jacinda Ardern eased Auckland’s alert level to L3 from L4 but extended virus-led restrictions for at least two weeks, not one. Also, cases outside Auckland and abroad add challenges for the market sentiment and the NZD/USD prices.

Talking about economics, Westpac Consumer Survey results dropped below 107.1 previous readouts to 102.7 for the third quarter (Q3). On the other hand, the US NAHB Housing Market Index ended four months of declines in September, rising 1 point to 76.

Moving on, NZD/USD traders will pay close attention to the Evergrande saga ahead of China's return to trading on Wednesday. Also likely to challenge the pair is the Fed tapering concerns and COVID-19 fears. RBA Minutes and New Zealand Credit Card Spending for August act as extra catalysts to watch.

Technical analysis

50-DMA challenges NZD/USD bears around 0.7010 but bulls are less likely to return below 100-DMA, near 0.7075.