- The NZD / USD continues to lose ground on Wednesday and falls to fresh multi-month lows.
- The announcement by the New Zealand government the day before to curb house prices weighed on the NZD.
- Risk-off sentiment benefits the safe-haven USD and contributes to the current slide for the pair.
The pair NZD / USD remains under pressure at the start of the European session on Wednesday and falls to fresh four-month lows, around the 0.6970 region.
The pair has extended the heavy losses of the previous day and lost some additional ground during the early part of the trading action on Wednesday. The New Zealand government announced on Tuesday a series of measures to cool down the housing market. The move that eased pressure on the Reserve Bank of New Zealand (RBNZ) to raise rates has eased, which has been seen as a key factor that continues to weigh on the New Zealand dollar.
Apart of this, the prevailing sentiment of risk aversion has benefited the safe haven US dollar and it has further pushed the perceived riskier currency flows away from the New Zealand dollar. Investors have become cautious after a increase in COVID-19 infections and a series of renewed lockdown measures in Europe. This, along with Western sanctions on Chinese officials for human rights violations and abuses in Xinjiang, has taken its toll on global risk sentiment.
The US dollar has been supported by prospects for a relatively faster US economic recovery from the pandemic and it has not appeared to be affected by the current decline in US Treasury yields. Fed Chairman Jerome Powell on Tuesday downplayed the risks that economic growth would trigger unwanted inflation. This, in turn, dragged the yield on the 10-year US government bond away from the highs of more than a year hit last week.
From a technical perspective, the drop could also be attributed to some technical selling after the close below the key psychological level of 0.7000. This could have set the stage for additional weakness, although the extreme oversold conditions on the 1 hour charts warrant some consolidation or a modest bounce. That said, any recovery attempt could be seen as a selling opportunity and remain limited.
NZD / USD technical levels
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