NZD/USD drops back to 0.7000, ignores NZ push to cool down property crisis

• NZD/USD reverses Monday’s recovery moves, pressured around intraday low.
• NZ Government removes tax relief over housing loan interest to tame the real-estate prices.
• Risk appetite worsens amid uncertainty over US debt limit, stimulus and China’s Evergande.
• Fed Chairman Powell’s testimony, headlines over stimulus and China will be important for fresh impulse.

NZD/USD takes offers around 0.7000, down 0.25% intraday during early Tuesday. The kiwi pair fails to keep the previous day’s rebound amid risk-off mood, also ignoring the New Zealand (NZ) government efforts to cool down the hot property prices.

Reuters came out with the news from New Zealand stating, “The New Zealand government released draft legislation on Tuesday that seeks to disallow property investors to deduct mortgage interest from their taxable incomes, in its attempt to cool a red-hot housing market.” Rising property prices are the main challenge for the Reserve Bank of New Zealand (RBNZ) policymakers for which they’re ready to uplift the interest rate.

Challenging the Kiwi pair’s moves is the uncertainty over the US debt limit extension and infrastructures spending bill. After the US Senate’s failures to advance a measure to suspend the federal debt ceiling and avoid a partial government shutdown, Treasury Secretary Janet Yellen pushed for swift address to resolve the debt limit issue. On the same line were comments from US Senate Democratic Leader Chuck Schumer who said, per Reuters, “Democrats will take further action this week to avoid a government shutdown and debt default.”

On Monday, House Speaker Nancy Pelosi showed optimism to tackle the deadlock of the US infrastructure stimulus bill the previous day but hinted at a lesser figure than President Joe Biden’s $3.5 trillion push.

It’s worth mentioning that prepared remarks of Fed Chair Jerome Powell for today’s testimony show the readiness of the US central banker to dial back the easy money and favored the US Dollar Index (DXY) earlier in Asia.  Also negative for the NZD/USD prices were China's GDP forecast cut by Goldman Sachs and World Bank.

Amid these plays, S&P 500 Futures drop 0.20% while the US 10-year Treasury yields struggle around the three-month top.

Given the lack of major data/events at home ahead of the next weeks’ RBNZ, NZD/USD traders will keep their eyes on the aforementioned catalysts for fresh impulse.

Technical analysis

While a 100-pips area between 0.6985 and 0.7085 restricts short-term NZD/USD moves, bulls are less likely to take entries below the 200-DMA level surrounding 0.7115.