- The NZD / USD has failed to recover 0.6800 ahead of the US data, with the DMA of 21 at 0.6788 acting as a magnet.
- The pair risks incurring further losses if optimism about the US economic outlook / Fed tightening outlook continues to rise.
The failure of NZD / USD to regain 0.6800 despite multiple attempts during the Asian session and early European trading hours seems to have been taken as a bad omen and the pair fell as low as 0.6760 in the last few hours. Ahead of the release of the key US ISM manufacturing PMI for December and the JOLTS job opening report for November at 15:00 GMT, the pair is in consolidation mode near 0.6780, where it is trading practically sideways at the day. This was followed by the drop fueled by Monday’s US yield surge that pushed the pair back from 0.6850, down 0.9% at the time, which was the pair’s worst performance since December 17.
As optimism about the US economic outlook in 2022 propels stocks and yields higher and fuels expectations that the Fed will meet or even exceed expectations for tightening this year, risks to the upside of the USD are increasing. That could bode badly for the NZD / USD, even if the RBNZ is far ahead of the Fed when it comes to monetary tightening. The absence of notable New Zealand data this week to stimulate the RBNZ price rally, in the face of an abundance of US data and Fed speech, means risk to the pair is on the downside. Short-term bears may be looking at an eventual push to the downside to support around 0.6700.
For now, however, the 21-day moving average at 0.6788 continues to act as a magnet. A notable risk to watch out for for NZD / USD is if New Zealand follows in Australia’s footsteps and endures an Omicron-driven spike in Covid-19 cases in the coming weeks / months. While in other parts of the world this has not led to an increase in serious illness and lockdowns, the New Zealand government has a history of enacting much stronger measures. If there is a significant outbreak in New Zealand, it will be interesting to see if the Kiwi follows in the Australian’s footsteps by putting faith in the fact that the country’s high vaccination rate will protect people rather than return to confinements.
Technical levels
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