- The NZD / USD gained strong positive traction for the third consecutive session on Monday.
- Widespread USD weakness continued to support ongoing positive momentum.
- A combination of factors could help limit losses in USD and gains for the pair.
The intraday selling of the USD accelerated during the middle of the European session and pushed the pair NZD / USD to four-day highs around the 0.6975 region in the past hour.
The pair built on last week’s bounce from the 0.6860 region, or the lowest level since Aug. 23, and gained traction for the third straight session on Monday. The current decline in the US dollar retracement from the highs of more than a year turned out to be a key factor that provided a good boost to the NZD / USD pair.
That said, a combination of factors should help limit deeper losses for the dollar and keep any significant rises for the NZD / USD in check. Expectations of an early policy tightening by the Fed, coupled with a new boost in US Treasury yields, should continue to act as a tailwind for the dollar.
Investors appear to be convinced that the Fed will begin reducing its massive pandemic-era stimulus as early as November. Markets also appear to have begun to appreciate the prospect of a Fed interest rate hike in 2022. Other than this, the risk aversion momentum could provide further support to the dollar as a safe haven.
Concerns that the Evergrande Group debt crisis could spread throughout China’s real estate sector dampened investors’ appetite for perceived riskier assets. This was evident from a generally weaker tone in equity markets. This, in turn, could prevent traders from placing aggressive bullish bets on the perceived riskier kiwi.
So it remains to be seen if the bulls can capitalize on the NZD / USD move with some new bids at higher levels. There is no major economic data on market movement to be released in the US on Monday, making it wiser to wait for a strong follow-up buy before positioning for more profit.
Technical levels
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