- The NZD / USD captures some new buying on Tuesday amid some selling bias around the USD.
- Risk appetite sentiment weighs on the safe haven USD and benefits the higher perceived risk NZD.
- The rally in US bond yields could offer some support to the USD and limit the pair’s further gains.
The USD sell bias has accelerated at the start of the European session on Tuesday and has pushed the NZD / USD pair to daily highs near the 0.7200 level, although it has lacked continuation. At the time of writing, the pair is moving back to the 0.7170 region, still positive on the day.
Following the previous day’s rejection drop of over 50 pips from the aforementioned level, the pair has captured some new purchases on Tuesday and has supported by widespread US dollar weakness. Market optimism has weighed on demand for the safe haven US dollar and benefited the higher perceived risk New Zealand dollar.
Markets have turned bullish after Democrats introduced a joint $ 1.9 trillion budget measure on Monday, in a step toward eluding the Republicans. Renewed hopes for massive fiscal stimulus in the United States, in turn, have increased prospects for a strong global economic recovery and have increased investor confidence.
Meanwhile, expectations of increased government indebtedness, together with risk money flows, have sparked new momentum in US Treasury yields This could help limit any significant declines for the USD and limit the rise of the NZD / USD pair, which warrants caution for aggressive bulls.
Even from a technical perspective, repeated failures near the 0.7240-50 resistance zone have constituted the formation of a bearish shoulder-head-shoulder pattern on short-term charts. This makes it prudent to wait for a solid continuation of buying before positioning for another bullish move.
In the absence of major economic releases from the US, broader market risk sentiment will play a key role in influencing the intraday movement of the NZD / USD pair. Apart from this, the news of the US stimulus could also generate some short-term business opportunities.
NZD / USD technical levels