- NZD / USD witnesses aggressive selling on Wednesday amid broad USD strength.
- The RBNZ’s decision to raise interest rates does little to impress bulls or lend support to the pair.
- Risk aversion also helps drive money flows away from the higher perceived risk NZD.
The pair NZD / USD has fallen to new weekly lows during the European session on Wednesday, with the bears now looking to extend downside momentum below the 0.6900 level.
The pair has struggled to capitalize on its modest post-RBNZ rally and has witnessed a dramatic reversal from the 0.6980-85 region amid strong buying interest around the US dollar. It is worth mentioning that the Reserve Bank of New Zealand raised interest rates on Wednesday for the first time in seven years. New Zealand’s central bank has also said it plans to remove more stimulus measures as the economy continues to recover. The bulls, however, seem rather unimpressed by the bullish announcement and have instead picked up signs of broad USD strength.
The US dollar has continued to receive support from firm expectations that the Fed would begin reversing its massive pandemic-era stimulus as early as November.. Markets also appear to have begun pricing out prospects for an interest rate hike in 2022 amid concerns that continued rising oil and energy prices will fuel inflation. This, coupled with rising US Treasury yields, has provided an additional boost to the dollar, which in turn has been seen as a key factor prompting aggressive selling around the NZD / USD pair.
In the meantime, concerns that a faster-than-expected rise in inflation could derail the global economic recovery It has affected investors’ appetite for May Risk assets. This has been evident by a sharp pullback in equity markets, which has further benefited the safe-haven USD and pushed the NZD May flows away from perceived risk. With the latest move to the downside, the NZD / USD pair has returned a significant part of its recent bounce from lows of more than a month, around the 0.6860 region touched last week, and appears vulnerable to extending the trend to the downside. come down.
Market participants are now awaiting the release of the US ADP report on private sector employment for some momentum later at the start of the American session. This, along with US bond yields, will influence price dynamics around the USD. Apart from this, investors will take more indications of the broader market risk sentiment to seize some short-term opportunities around the NZD / USD pair.
NZD / USD technical levels
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