- NZD/USD witnesses selling for the second day in a row and pulls further away from the 2022 high.
- The global flight to the safe haven continues to support the USD and puts some downward pressure on the pair.
- Sustained weakness below the 0.6800 level should pave the way for a deeper corrective pullback.
The pair NZD/USD has dropped to a new daily low at the start of the European session on Tuesday, with the bears now waiting for a sustained break below the 0.6800 level.
The pair saw some selling for the second day in a row on Tuesday and extended the previous day’s sharp pullback from the 200-day SMA, around the 0.6925 zone, or the highest level since Nov 2021. The latest drop could be attributed to the appearance of new purchases around the US dollarwhich continued to find support from the global flight to safe haven.
The war between russia and ukraine it remained the dominant theme in the markets and showed no signs of ending. In fact, Russian planes continued to drop bombs near the Ukrainian capital, Kiev, and the third round of ceasefire talks ended without much progress. Aside from this, fears of a major inflation shock weighed on investor sentiment and benefited the safe-haven US dollar.
Apart of this, recent gains in commodity prices have been fueling stagflation fears and have forced investors out of assets with higher perceived risk. The monetary flow of risk aversion was evident by prolonged selling in global equity markets. This, coupled with a rise in US Treasury yields, acted as a tailwind for the USD and weighed on the NZD/USD pair.
Since the prior day failure near a technically significant moving averagethe subsequent drop suggests that a week-long move higher in the commodity price-linked NZD may have run out of steam. Some continuation selling below the 0.6800 level will firm up the outlook and trigger aggressive technical selling around the NZD/USD pair.paving the way for a deeper correction.
There are no major economic data releases out of the US on Tuesday, leaving the USD at the mercy of further developments around the Russia-Ukraine war and US bond yields. Aside from this, investors will take cues from the broader market risk sentiment to take advantage of some short-term opportunities around the NZD/USD pair.
NZD/USD technical levels
Source: Fx Street
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