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  • NZD/USD stays mildly offered near two-week low after the heaviest drop in five weeks marked on Tuesday.
  • New Zealand Labor Party signals tax hike for the top 2.0% earners if elected.
  • NZ Truckometer, Manufacturing Sales dropped due to the COVID-19 resurgence.
  • News from AstraZeneca adds to the already strong risk-off mood.

NZD/USD remains depressed near 0.6607 amid the initial Asian trading on Wednesday. The kiwi pair slumped the most since early August on Tuesday as sellers cheered a broad risk-off mood and the US dollar strength. The pair’s latest weakness could be traced from the extension of downbeat catalysts at home and abroad.

No fake promises from PM Ardern and company…

After initial offers over additional holidays, New Zealand (NZ) Prime Minister (PM) Jacinda Ardern’s Labor Party turned the table with an assurance of increasing the income tax rate to the top 39% level on earners of New Zealand Dollar (NZD) 180K and above. This would affect near 2.0% of the earners and will add NZD 550 million per year to the government’s kitty. The news weighs on the kiwi as fears of the higher income tax may push traders to park their funds in the already strong US dollar.

Also weighing on the Kiwi could be a 12.2% drop in the second quarter (Q2) Manufacturing Sales, versus -1.7% prior, as well as -6.5% and -13.1% respective figures of the heavy and light traffic indicators.

Other than the domestic catalysts, disappointments from the coronavirus (COVID-19) vaccine front also drag the quote downwards. After AstraZeneca’s halt to the third phase of vaccine trials, citing safety concerns, the other nine drugmakers refrained from seeking approvals for experiments on COVID-19 cure unless being certain to be safe.

Elsewhere, the US-China tussle continues with American President Donald Trump’s promise of “tough stand on China”. Additionally, Brexit woes and fears of delay in the US COVID-19 stimulus package also heavy the risk-tone sentiment.

Amid these plays, the S&P 500 Futures drop 0.60% to 3,315 after Wall Street witnessed the sea of red led by Tesla’s 17% slump.

Looking forward, preliminary readings of New Zealand’s ANZ Business Confidence and Activity Outlook will precede China’s August month Consumer Price Index (CPI) to direct the pair’s near-term moves. While forecasts concerning the domestic data suggest pullback in the quote, downbeat expectations of Chinese inflation numbers and risk-off mood keeps the downside pressure on the NZD/USD prices.

Technical analysis

Despite breaking the 21-day SMA, at 0.6626 now, sellers are yet to conquer the 50-day SMA level of 0.6610 and an ascending trend line from May 15, currently around 0.6600, to mark their dominance. As a result, the pair’s pullback to regain the 0.6700 threshold can’t be ruled out.