- Sustained buying around USD triggers new selling around NZD / USD on Tuesday.
- A pullback in the stock markets further affects the NZD with the highest perceived risk.
- A convincing break below the 0.7200 level should pave the way for further losses.
The pair NZD / USD has fallen to a week and a half lows during Tuesday’s European session, with bears now pointing to some continuation weakness below the 0.7200 level.
The pair has not been able to capitalize on the positive movement of the previous day, has encountered new sales on Tuesday and appears to be poised to extend its recent sharp pullback from the highest level since August 2017. The drop marks the third day of negative movement of the previous four and is due to a general strength of the US dollar.
The USD has remained supported by the Prospects for a Relatively Quicker US Economic Recovery Amid Progress on COVID-19 Vaccination and a Massive US Fiscal Spending Plan. Reflation trading has been fueling expectations of a pick-up in inflation and has raised doubts that the Fed will keep rates low for a longer period.
Apart of this, a softer risk tone, as shown by weaker sentiment around equity markets, has provided a further boost to the safe haven USD. This, in turn, has been seen as another factor that has weighed on the higher perceived risk NZD and has contributed to the NZD / USD falling towards the 0.7200 level.
A convincing break below the aforementioned level will be seen as a new trigger for the bears and will pave the way for a further short-term downside amid the absence of relevant economic releases. The bearish outlook is reinforced by the fact that the technical indicators on the daily chart have started to move into negative territory.
Therefore, a further decline towards intermediate support near the 0.7160-55 region now seems like a clear possibility. Some subsequent selling could make the NZD / USD pair vulnerable to accelerate the slide towards the test of the round 0.7100 level.
NZD / USD technical levels