- RBNZ’s relatively upbeat economic assessment provided a strong boost to NZD/USD.
- The upbeat market mood also benefitted perceived riskier currencies, including kiwi.
- COVID-19 jitters weighed on the USD and remained supportive of the strong move.
The NZD/USD pair consolidated its post-RBNZ gains to the highest level since February 2019 and was seen oscillating in a range just below the 0.6900 round-figure mark.
The pair prolonged its recent bullish trajectory and got a strong lift on Wednesday in reaction to the Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr’s upbeat comments on the state of the economy. In the post-meeting press conference, Orr said that domestic economic activity since August has been more resilient than previously assumed.
Earlier the RBNZ held the official cash rate (OCR) steady at 0.25%, as was widely anticipated, and reiterated that rates would stay there at least until March 2021. New Zealand’s central bank also introduced a new funding-for-lending programme (FLP) for banks, which was seen as a sign that the chances of negative rates have receded.
This, in turn, prompted a fresh bout of short-covering and momentarily pushed the NZD/USD pair to levels just above the 0.6900 mark. Apart from this, the optimism over a potential vaccine for the highly contagious coronavirus disease remained supportive of the upbeat market mood, which provided an additional boost to the perceived riskier kiwi.
On the other hand, a promising development in late-stage COVID-19 vaccine trials was overshadowed by concerns about the continuous surge in new cases across the United States. This, along with the imposition of stricter restrictions in several US states, revived hopes for a substantial US fiscal stimulus measures to support the economy.
This, in turn, kept the US dollar bulls on the defensive. The greenback was further pressured by a weaker tone surrounding the US Treasury bond yields, which remained supportive of the NZD/USD pair’s bullish momentum. However, overstretched conditions on short-term charts kept a lid on any further gains and led to the consolidative price action.
Given that the US banks will remain closed on Wednesday in observance of Veterans Day, the broader market risk sentiment should play a key role in influencing the USD price dynamics and produce some meaningful trading opportunities around the NZD/USD pair.
Technical levels to watch
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