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NZD/USD: Bears attack monthly support near 0.6750 on pre-Fed caution, coronavirus fears

  • NZD/USD refreshes weekly bottom as sellers poke five-week-old support line.
  • Downtick in US stock futures triggers latest weakness amid chatters over Fed action.
  • Positives concerning the US-China talks, NZ data fails to impress buyers.
  • Light calendar keeps sellers hopeful ahead of next week’s FOMC.

NZD/USD remains on the back foot around the monthly support line, recently refreshing daily/weekly low near 0.6750 amid Friday’s Asian session.

The kiwi pair failed to cheer the broad US dollar weakness, as well as positive signals from the largest trading partners like Australia and China the previous day. The quote also recently ignores upbeat headlines and mixed data that may have helped Antipodeans as equity futures begin the day on a back foot.

That said, New Zealand’s Business NZ PMI for December eased to 53.7 versus 56.0 expected and 50.6 prior. Further, Visitor Arrivals YoY for November improved to +3.8% from -27.3%.

In addition to the downbeat US stock futures, headlines from the NZ Herald seem to have weighed down the NZD/USD prices of late. “Almost 2000 Omicron cases a day – 10 times the Delta-peak – are expected in the Auckland region in just six weeks in the event of an outbreak, according to latest modeling,” said the news.

It’s worth noting that Australia’s Unemployment Rate dropped to the 14-year low of 4.2% while the Employment Change also rose past expectations on Thursday. Further, The People’s Bank of China (PBOC) surprised markets with a first cut in the 5-year Loan Prime Rate (LPR), by 5 basis points (bps) to 4.60%, in 21 months on the previous day.

Additionally, the US Jobless Claims jumped to the highest since late October and the Philadelphia Fed Manufacturing Survey details also improved for January, which in turn eased inflation fears and dragged the US Treasury yields as well as the US Dollar Index.

Elsewhere, US Treasury Secretary Yellen recently said in the CNBC interview that Inflation rose by more than most economists, including me, expected and of course, it’s our responsibility with the Fed to address that. And we will. Additionally, SCMP signaled that China’s Yang Jiechi and US national security adviser Jake Sullivan are up for a crunch meeting but no date was indicated.

Amid these plays, the US 10-year Treasury yields posted a second consecutive daily loss, down four basis points to 1.79% at the latest, whereas the S&P 500 Future dropped 0.30% intraday by the press time.

Given the risk-off mood and the Omicron fears weighing on the NZD/USD prices amid a light calendar, the pair traders are likely to extend the losses as pre-Fed fears grow during an absence of any major data/events on Friday.

Technical analysis

Although sustained trading below the 21-DMA level of 0.6800 keeps NZD/USD bears hopeful, a clear downside break of an ascending trend line from December 20, near 0.6750, becomes necessary for the NZD/USD prices to aim for the 2021 bottom surrounding the 0.6700 threshold.