- The NZD / USD is witnessing strong selling for the third day in a row on Tuesday.
- Weaker New Zealand retail sales data puts pressure amid sustained USD buying.
- Acceptance below the 0.7000 level further exacerbates the downward pressure.
The pair NZD / USD kept under pressure during the European session on Tuesday, although has managed to rally a few pips from the lowest level since Oct 13 at 0.6923 reached earlier in the day. At the time of writing, the pair remains negative on the day around the 0.6935 region.
The pair failed to capitalize on its positive intraday movement, it encountered new sales close to the region of 0.6975 and it moved lower for the third day in a row on Tuesday. The decline in New Zealand retail sales of 8.1% in the September quarterIt was not as bad as economists expected, although it was enough to weigh on the New Zealand dollar. This, coupled with strong bullish sentiment around the US dollar, put strong downward pressure on the NZD / USD pair.
In fact, the DXY dollar index shot up to the highest level since July 2020 during the early part of the trade action and was supported by speculation of an early tightening of monetary policies by the Fed. Joe Biden nominated Jerome Powell to serve as Fed Chairman for a second term. The fact that investors viewed the other candidate, Lael Brainard, as the more pessimistic of the two, the announcement reinforced expectations for higher interest rates in the United States.
Fed fund futures indicate the possibility of an eventual Fed rate hike for July 2022 and a high probability of another hike for November. This, in turn, triggered a strong rally in US Treasury yields, which continued to act as a tailwind for the USDD. Apart of this, concerns about the growing number of COVID-19 cases in Europe and the reinstatement of restrictive measures they further benefited the safe haven USD.
Apart from this, the technical sale after a sustained breakout and acceptance below the psychological level of 0.7000 further contributed to the continued decline in the NZD / SD pair. Furthermore, markets are already seem to have fully appreciated another rate hike by the Reserve Bank of New Zealand (RBNZ) at the next meeting on Wednesday. This, in turn, favors the bears and supports the prospects for an extension of the downside move.
Ahead of Wednesday’s central bank event, investors could take cues from the release of the preliminary US PMI for November at the start of the US session. The data, along with US bond yields and broader market risk sentiment, will influence USD price dynamics and provide some boost to the NZD / USD pair.
NZD / USD technical levels
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