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- NZD/USD consolidates the previous day’s losses from the seven-day low of 0.6651.
- Virus-led risk aversion remains as the key driver, US dollar strength cheered the most.
- Traders seem to prepare for Wednesday’s RBNZ, Fedspeak can offer intermediate moves.
NZD/USD struggles for a clear direction near 0.6665 during Tuesday’s Asian session. The pair dropped the most since early-June on Monday as the US dollar strength helped kiwi bears prepare for Wednesday’s Reserve Bank of New Zealand (RBNZ) monetary policy meeting. Not only the coronavirus (COVID-19) woes but the Sino-American tension and the US stimulus deadlock were also contributors to the latest risk-off mood.
Is it the pre-RBNZ warm-up?
With the surge in virus numbers from Europe and the UK recalling local lockdowns, also indicating fears of national restrictions, the economic pessimism grew on Monday. The same push policymakers from the European Central Bank (ECB) and the US Federal Reserve to mark concern over the latest economic recovery during their latest public appearances and speeches.
Further, the American moves to reject Beijing’s claim over the South China Sea gets support from the UK, France and Germany at the United Nations (UN). The issue has recently sparked tensions between the US and China while both the economies are still jostling over trade terms.
It’s worth mentioning that the delay in the US stimulus and Brexit woes also add to the market pessimism and weigh on the risk barometers. While portraying the same, Wall Street dropped on Monday whereas S&P 500 Futures await fresh clues at 3,280, up 0.15% intraday as we write.
The US dollar index (DXY) was the winner of the day with over 0.70% gains to probe the highest since August 12. The greenback gauge seesaws around 93.55 by the time of the press.
Moving on, a light calendar may keep traders wander around the multi-day low but comments from the US Federal Reserve (Fed) policymakers may offer intermediate moves ahead of tomorrow’s RBNZ meeting.
Although the New Zealand central bank isn’t expected to alter its current monetary policy, a dovish outlook is widely anticipated. Hence, analysts at the Australia and New Zealand Banking Group said, “We don’t expect any change on policy, but the tone will be dovish and they may signal an intention to flex the pace of the LSAP more to help flatten the curve, which would take the pressure off the NZD.”
Technical analysis
An ascending trend line from August 20, at 0.6675 now, offers immediate resistance to the pair whereas a 50-day SMA near 0.6640 lures the bears due to the previous day’s downside break of the aforementioned support line, now resistance.