NZD/USD: Sidelined below 0.7000 as traders seek fresh clues
- NZD/USD seesaws inside a 20-pip range after bouncing off yearly low.
- Market sentiment remains directionless following a positive day.
- Risk catalysts, US data and ECB will be crucial for immediate direction.
NZD/USD struggles to extend the previous day’s recovery moves, the strongest in over a week, around 0.6960-80 area amid the early Asian session on Thursday. In doing so, the kiwi pair portrays the pre-ECB trading lull amid a light calendar.
The quote’s recovery moves from the eight-month low could be traced to the upbeat performance of US equities amid strong earnings. The same dragged the US Dollar Index (DXY) from a three-month high while also snapping a four-day uptrend. It’s worth noting that the economic optimism also backed the US Treasury yields to post a second positive day following its drop to the early February levels on Monday.
Challenging the moves were headlines concerning the coronavirus Delta variant as Australia marked the highest daily infections since September whereas figures from the UK and Indonesia were also grim. Even so, policymakers were optimistic to overcome the pandemic, as they did in the first wave.
The same could be identified from comments of World Health Organisation (WHO) head Tedros Adhanom Ghebreyesus who said, per Reuters, “The world's leading economies could bring the covid-19 pandemic under control in months.”
Other than the covid woes, uncertainty over US President Joe Biden’s infrastructure spending plan and US budget also challenged the NZD/USD buyers but failed.
New Zealand’s Credit Card Spending for June was also among the negatives that initially weighed on the kiwi pair before the bullish play during the US session. That said, the early signal for retail sales eased to 6.3% YoY versus 27.2% prior.
Given the lack of major data/events, coupled with cautious mood ahead of the ECB, NZD/USD may remain sidelined but the challenges to the risk appetite could keep prices pressured.
In this regard, ANZ Bank said, “There is no local data today or tomorrow, but there are some big global events including the ECB meeting, which will shape how EUR trades, and by extension the NZD and other correlated currencies. In the meantime, it’s back to watching bonds, which are driving FX.”
Technical analysis
Although the monthly support line teases NZD/USD bears around 0.6915-10, the pair’s recovery moves need to cross 21-DMA immediate hurdle near the 0.7000 threshold to recall short-term buyers.