- The NZD / USD moves lower on Thursday and breaks three consecutive days of gains.
- The recent surge in US bond yields supports the USD and puts pressure on the pair.
- Risk appetite helps limit losses from the highest perceived risk NZD before US data.
The pair NZD / USD remains on the defensive during the European jeuves session, struggling near the lower limit of its intraday trading range just above the 0.6950 region.
The pair has witnessed a modest pullback from the 50-day SMA, around the 0.6980 region, and for now appears to have halted this week’s strong recovery from the 0.6800 region, at yearly lows. This marks the first day of negative movement in the previous four and it is due exclusively to a good rebound in demand for the US dollar.
Investors seem convinced that the Fed could still begin to reduce its massive asset purchases in 2021, amid optimism that the Delta variant of the coronavirus will not derail the economic recovery. The United States Food and Drug Administration (FDA) granted full approval to Pfizer / BioNTech’s vaccine for COVID-19 and raised hopes that vaccination in the United States could be accelerated.
In addition to this, America’s leading infectious disease expert, Dr. Anthony Fauci, said that covid-19 could be under control early next year and further increased investor confidence. Market expectations were bolstered by the recent strong move in US Treasury yields, which continued to act as a tailwind for the USD.
That said, the underlying bullish sentiment in financial markets it limited any further rise for the safe-haven US dollar and offered some support to the higher perceived risk NZD. Aside from this, investors also seemed reluctant to open aggressive positions ahead of Fed Chairman Jerome Powell’s speech at the Jackson Hole Symposium.
In the meantime, investors could take the cues from Thursday’s release of the US second quarter GDP (second estimate) and weekly jobless claims. This, coupled with US bond yields and broader market risk sentiment, could influence USD price dynamics and generate some short-term trading opportunities around the NZD / USD pair.
Technical levels to observe
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