NZD/USD reversal from 0.6175 extends below 0.6050

NZD/USD's bearish correction from 0.6175 extends below 0.6050.
Risk aversion hits the kiwi as Trumps threatens China with more tariffs.
Below 0.6050, the pair might aim towards 0.5990 and 0.5905.

Guillermo Alcala FXStreet

The New Zealand dollar’s rebound from Tuesday’s lows near 0.5900 was capped on Thursday at 0.6175, and the pair has extended its decline on Friday, to levels below 0.6050. The NZD/USD has given away more than 2% over the last sessions, weighed by the risk-off market sentiment.

Kiwi dives as Trump boosts risk aversion

US President Donald Trump has spooked investors threatening China with new tariffs on retaliation for the mismanagement of the coronavirus pandemic. Market concerns about further escalation of the trade war, combined with another set of grim macroeconomic data in the US and the EU have crushed risk appetite.

The negative market sentiment has triggered declines in equity markets, with the Dow Jones and the S&P losing more than 2% with the Nasdaq Composite Index 3% down. This context has favoured safe havens like the US dollar and the Japanese yen in detriment of riskier assets like the NZD.

NZD/USD testing support at 0.6045/50

The pair is now testing support at the 50-day SMA around 0.6050. Below here, next potential support levels might be at 0.5990 (April 28 low) and 0.5905 (April 23 low). On the upside, a bullish reaction might find resistance at 0.6090 (April 20 high) and before another go at 0.6175 (April 30 high). Beyond ere, the pair might aim towards the 100-day SMA at 0.6300.

Author

Guillermo Alcala

FXStreet

Graduated in Communication Sciences at the Universidad del Pais Vasco and Universiteit van Amsterdam, Guillermo has been working as financial news editor and copywriter in diverse Forex-related firms, like FXStreet and Kantox.

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