- NZD/USD continued losing ground on Wednesday and dropped to fresh multi-month lows.
- The NZ government's overnight announcement to curb housing prices weighed on the kiwi.
- The risk-off mood benefitted the safe-haven USD and contributed to the ongoing downfall.
The NZD/USD pair remained depressed through the Asian session on Wednesday and dropped to fresh four-month lows, around the 0.6975 region in the last hour.
The pair added to the previous day's heavy losses and lost some additional ground during the early part of the trading action on Wednesday. The New Zealand government on Tuesday announced a series of measures to cool the housing market. The move eased pressure on the Reserve Bank of New Zealand (RBNZ) to raise rates has diminished, which was seen as a key factor that continued weighing on the New Zealand dollar.
Apart from this, the prevalent risk-off mood benefitted the safe-haven US dollar and further drove flows away from the perceived riskier kiwi. Investors turned caution on the back of a spike in COVID-19 infections and a string of renewed lockdown measures in Europe. This, along with Western sanctions on Chinese officials over the human rights violations and abuses in Xinjiang, took its toll on the global risk sentiment.
The USD was further underpinned by the prospects for a relatively faster US economic recovery from the pandemic and seemed unaffected by the ongoing slide in the US Treasury bond yields. The Fed Chair Jerome Powell on Tuesday downplayed the risks that economic growth would spur unwanted inflation. This, in turn, dragged the yield on the benchmark 10-year US government bond further away from over one-year tops touched last week.
From a technical perspective, the downfall could further be attributed to some technical selling following the overnight close below the key 0.7000 psychological mark. This might have already set the stage for further weakness, though extremely oversold conditions on hourly charts warrant some consolidation or a modest bounce. That said, any attempted recovery might still be seen as a selling opportunity and remain limited.
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 edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.