NZD/USD fades upside momentum below 0.6700

NZD/USD drops to 0.6658 during early Thursday morning in Asia. The kiwi pair refreshed over 6.5 month top while rising to 0.6690 the previous day. However, the following pullback dwindles above 0.6650 and raises questions for the pair traders.

While hopes of further stimulus from America and broad US dollar weakness pleased the bulls off-late, the recent weakness could be traced from the fresh tussle between the US and China. After Washington ordered China to evacuate its consulate office in Houston, Beijing also ordered the Trump administration to leave Wuhan. The moves got bitter as US President Donald Trump recently said to weigh further actions against the dragon nation. Furthermore, Axios' headlines suggesting the San Francisco consulate is harboring Chinese military researcher wanted by FBI could add to the prevailing risk reset.

Elsewhere, Politico cited the White House Chief of Staff Mark Meadows to clarify that the Trump administration opposed the short-term extension of federal unemployment benefits. The government relief to unemployed persons will expire in July and the US Senators are less likely to agree over the much-awaited fiscal plan before then. As a result, the policymakers earlier cited readiness for an intermediate relief measure while they jostle over another trillion-dollar worth aid package.

It should also be noted that the coronavirus (COVID-19) numbers from the US and Australia continue to be worrisome with global counts of new cases heading to 14 million. This dims the positive talks surrounding the virus vaccine and their successful trials that have recently been making rounds.

Amid all these catalysts, S&P 500 Futures refrain from extending the previous day’s rise while the US 10-year Treasury yields remain sluggish around 0.60%.

Moving on, a light calendar in Asia-Pacific, except for the Aussie National Australia Bank's Business Confidence for the second quarter (Q2), expected -8 versus -11 prior, will favor the recent risk reset and weigh on the pair. However, any surprise positives do have the capacity to propel the NZD/USD prices beyond the immediate key resistance surrounding 0.6700.

Technical analysis

Unless successfully breaking 0.6700 threshold, bulls cannot attack December 31, 2019 peak surrounding 0.6760. Alternatively, a downside break below 0.6600 will recall the sellers, even for a short-term target of 21-day SMA near 0.6540.