- Kiwi is among the worst G10 performer on Thursday.
- US dollar gains momentum as US yields resume the upside after Fed’s pause on Wednesday.
The NZD/USD peaked during the European session at 0.7269, the highest level in two weeks and then it reversed, falling almost a hundred pips from the top. After the beginning of the American session, it bottomed at 0.7171. It remains under pressure, near the lows but still trading above the level it had before the Fed’s statement.
The reversal in NZD/USD took place amid a stronger US dollar across the board. Higher US yields boosted the greenback. The 10-year dropped on Wednesday to 1.61% and recently hit at 1.75%, the highest level since January of 2020. The DXY is at 91.80, far from the daily low (91.25) but still slightly below the level it had prior to the FOMC statement.
Economic data from the US came in mixed on Thursday. Initial jobless claims rose unexpectedly to the highest level in four weeks while the Philly Fed jumped to 51.8, reaching levels not seen since 1973.
In New Zealand, growth data surprised to the downside. The economy contracted 1% in Q4 against expectations of a 0.1% expansion. “The contraction in Q4 reflects the impact of the pandemic. Though New Zealand was under the least stringent Alert Level 1 for much of Q4, its economy contracted, likely due to easing of pent-up demand and weaker external demand (on resurgent waves of infections in the global economy in Q4)”, explained Jonathan Koh, Economist at Standard Chartered.
From a technical perspective, NZD/USD found support at 0.7170. A break lower could expose the weekly low at 0.7142. A consolidation under 0.7150 would be a negative technical development. On the upside, 0.7205 is again a resistance area, followed by 0.7240. A daily close above 0.7250 would improve the outlook for the kiwi.
Technical levels
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