- NZD/USD rebounds sharply from eight-day troughs.
- USD bears in control amid US stimulus hopes, risk-on mood.
- Rally in US T-yields could cap the upsurge in the kiwi.
NZD/USD remains strongly bid above 0.6600 in the European session, challenging fresh two-day highs near 0.6625, courtesy of the relentless selling seen in the US dollar across its main competitors.
The greenback was thrown under the bus after the US policymakers advanced closer to an agreement on a new fiscal stimulus package late Tuesday, boosting odds that a deal could be reached ahead of the November 3 election. The sentiment on the global stocks improved on stimulus expectations and weighed negatively on the safe-haven buck.
Collaborating with the rebound in the kiwi from eight-day lows of 0.6553 reached Tuesday, the dairy price forecasts upgrade by the Bank of New Zealand (BNZ) also helped. The kiwi bank revised up its 2020/21 prediction from NZD 6.5 per kilogram (KG) to 6.8 recently, matching Fonterra’s upward revision. Note that dairy is New Zealand’s top export product.
However, it remains to be seen if the major can sustain the recovery gains above 0.6600 amid a rally in the US Treasury yields across the curve on stimulus hopes. The risk-on rally in the yields could likely make New Zealand dollar less attractive as an alternative higher-yielding asset.
Markets look forward to another round of stimulus talks due later on Wednesday for fresh trading impetus on the pair.
NZD/USD: Technical outlook
Immediate resistance is seen at 0.6631 (50-DMA), above which the 0.6650 psychological level could be tested. To the downside, strong support awaits at 0.6589 (50-DMA) should the bulls fail to defend the 0.6600 level.
NZD/USD: Additional levels
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