NZD/USD falls below 0.7050 as risk rally loses steam
- NZD/USD is edging lower during the European session on Wednesday.
- US Dollar Index stays relatively quiet above 92.20.
- 10-year US Treasury bond yield is posting small gains ahead of FOMC Minutes.
The NZD/USD pair pushed lower on Tuesday but managed to stage a rebound during the American trading hours before closing virtually unchanged at 0.7057. With investors turning cautious on Wednesday, the pair lost its traction and was last seen losing 0.27% on a daily basis at 0.7040.
During the Asian session, the data from New Zealand showed that the ANZ Commodity Price Index rose by 6.1% in March. This reading beat the market expectation of 2.7% by a wide margin but was largely ignored by market participants.
Currently, the Euro Stoxx 50 Index is down 0.3% on the day and the S&P 500 Futures are flat at 4,063 confirming the view that risk flows are struggling to dominate the financial markets. In the meantime, the benchmark 10-year US Treasury bond yield is up 0.65% on the day after losing more than 3% on Tuesday, helping the greenback show resilience. At the moment, the US Dollar Index down 0.04% at 92.26.
Later in the session, the FOMC will release the minutes of its March 16-17 meeting and US President Joe Biden will deliver an update on his spending plans.
NZD/USD near-term outlook
Credit Suisse analysts think that NZD/USD will continue to fluctuate in a neutral range between 0.6870 and 0.7200 in the near term.
"New Zealand’s vaccine rollout is lagging the rest of the developed world; investors might now reassess the validity of NZ’s so-far successful strategy of micro-lockdowns," analysts noted. “Given how responsive the currency has been to changes in expectations around non-traditional monetary policy, we think the RBNZ may prefer to tiptoe around the possibility of tightening in order to avoid an unwelcome rally in the NZD.”
Technical levels to watch for