- US-China trade pessimism continued exerting bearish pressure on Friday.
- Sliding US bond yields undermined the USD and helped limit further losses.
- Traders now look forward to Fedspeaks for some short-term opportunities.
The NZD/USD pair struggled to register any meaningful recovery and remained well within the striking distance of fresh multi-year lows set on Friday.
The pair added to its recent sharp losses and on Friday dropped to its lowest level since September 2015 amid doubts over any breakthrough from the upcoming US-China trade negotiations in early-October. The US President Donald Trump said that he is not interested in making a "limited" deal and was followed by news that China's delegation cancelled a visit to the US farms, which dampened prospects for an interim deal.
Subdued USD demand lends some support
Against the backdrop of fears of a further escalation of geopolitical tensions in the Middle East, the latest not so encouraging trade-related developments weighed on the global risk sentiment. This was evident from a weaker trading sentiment around equity markets, which eventually benefitted the US Dollar's relative safe-haven status and drove flows away from perceived riskier currencies - like the New Zealand Dollar.
Meanwhile, the global flight to safety triggered a fresh leg of a downfall in the US Treasury bond yields and kept the USD bulls on the defensive. A subdued USD price action turned out to be one of the key factors extending some support to the major and prompted some short-covering move on Monday amid near-term oversold conditions/absent relevant market moving economic releases.
The uptick, however, lacked any strong bullish conviction and the price action seems to suggest that the near-term bearish pressure might still be far from being over. Hence, any meaningful recovery attempt might still be seen as a selling opportunity as market participants now look forward to scheduled speeches by influential FOMC members for a fresh impetus later during the US session.
Technical levels to watch
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