- A combination of factors triggered new selling around the NZD / USD on Thursday.
- The rally in US bond yields and upbeat US data benefited the dollar and put pressure on the NZD / USD.
The pair NZD / USD it fell to fresh daily lows during the early days of the American session, and bears now expect a sustained break below the key psychological level 0.7000.
The pair struggled to capitalize on the positive movement the day before after the US CPI, instead, it encountered new offers on Thursday and broke two consecutive days of the winning streak. Concerns about the potential economic consequences of the fast-spreading Delta variant of the coronavirus were seen as a key factor that acted as a headwind for the perceived riskier kiwi. This, coupled with a modest rally in the US dollar, put some additional pressure on the NZD / USD pair.
The dollar was back in demand, halting the drop in profit-taking overnight amid the possibility of an earlier-than-anticipated drawdown by the Fed. Market bets strengthened after the release of the latest Market Index. US Producer Prices for July, which rose sharply for the sixth month in a row and offered little evidence of moderation in inflationary pressures. This, in turn, triggered a positive rally in US Treasury yields and kept the dollar supported.
Other economic data released from the US showed that the number of Americans claiming unemployment-related benefits fell to 375,000 during the week ending August 7 from the prior week’s upwardly revised reading of 387,000 (385,000 reported previously). Against the backdrop of Friday’s successful NFP report, the data marked another step toward the Fed’s goal of making substantial progress in the labor market recovery. This extended additional support to the dollar.
With the latest leg bearish, the NZD / USD pair has now reversed gains overnight and some subsequent selling below 0.7000 will expose weekly lows, around the 0.6970-65 region. This should now act as a key point for short-term traders. A sustained break below will set the stage for a further short-term depreciation move towards the lower bound of a nearly two-month trading range support, around the 0.6925-20 region.
Technical levels
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