- The risk-off impulse prompted fresh selling around NZD/USD on Tuesday.
- New COVID-19 variant fears continue weighing on investors’ sentiment.
- Declining US bond yields undermined the USD and helped limit the slide.
The NZD/USD pair dropped to the lowest level since November 2020 during the early European session, albeit recovered a few pips thereafter and was last seen trading around the 0.6800 mark.
Following the previous day's modest bounce, the NZD/USD pair came under fresh selling pressure on Tuesday and prolonged its one-month-old bearish trajectory. Concerns about the potential economic fallout from the spread of a new vaccine-resistant variant of the coronavirus – Omicron – continue weighing on investors' sentiment. This was evident from a fresh leg down in the global equity markets, which, in turn, was seen as a key factor that drove flows away from the perceived riskier kiwi.
Bulls seemed rather unimpressed and failed to gain any respite from the heavily offered tone around the US dollar, weighed down by declining US Treasury bond yields. The latest developments surrounding the coronavirus saga might have dashed market expectations for an early policy tightening by the Fed. This, along with the global flight to safety, dragged the yield on the benchmark 10-year US government bond to a near three-week low, back closer to the 1.45% threshold and undermined the greenback.
That said, extremely oversold conditions on short-term charts helped limit any deeper losses, rather assisted the NZD/USD pair to quickly recover around 20-25 pips from the 0.6780 region. Market participants now look forward to the US economic docket, highlighting the release of the Conference Board's Consumer Confidence Index later during the early North American session. The key focus, however, will be on Fed Chair Jerome Powell's testimony before the Senate Banking Committee.
Powell's remarks will influence market expectations about the Fed's next policy move and drive the USD demand. Apart from this, traders will further take cues from the broader market risk sentiment to grab some short-term opportunities around the NZD/USD pair.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD drops below 1.0800 after German Retail Sales data
EUR/USD has come under fresh selling pressure and trades below 1.0800 after the data from Germany showed that Retail Sales declined by 1.9% MoM in February. Resurgent US Dollar demand is adding to the downside in the pair. US data are next in focus.
GBP/USD stays weak near 1.2600 amid market caution
GBP/USD remains defensive near 1.2600 in European trading on Thursday. The hawkish tone from Fed Governor Christopher Waller keeps the US Dollar afloat amid a cautious trading environment ahead of key US data releases and the Good Friday trading lull.
Gold price bulls keenly await US PCE Price Index on Friday before placing fresh bets
Gold price (XAU/USD) continues with its struggle to make it through the $2,200 mark on Thursday and oscillates in a narrow trading band through the early part of the European session.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
The other terminal rate: How far will policy rates be cut?
Recent communication by the Federal Reserve and the ECB has made it clear that the first cut in official interest rates is coming. Both central banks are saying the same but the ECB communication is more opaque than that of the Fed.