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  • NZD/USD seesaws around 0.6540, the highest level since June 11.
  • Traders seem to ignore coronavirus updates from the US amid concerns that increased testing could be the reason.
  • US-China tussle may escalate following America’s air exercise to the South China Sea.
  • New Zealand’s ANZ Commodity Price Index, second-tier Aussie data and the US ISM Non-Manufacturing PMI will be the key.

NZD/USD remains on the front foot around 0.6540, currently at 0.6538, amid the initial Asian session on Monday. The pair began the week’s trading with a downtick from Friday’s close near 0.6535 to 0.6525. However, the following recovery moves attack a multi-day high, questioned multiple times during the last week.

Broad US dollar weakness, coupled with the surge in equities, could be considered as reasons for the pair’s recovery moves during the last week. The upside should have taken clues from the upbeat US employment data and China’s better than forecast activity numbers. Also likely to support the market’s risk-tone sentiment could be the global policymakers’ readiness to infuse further liquidity to combat the coronavirus (COVID-19). Other than the macro catalysts, New Zealand’s ability to tame the pandemic at home and gradually return to normal could also be cited as the reasons for the pair’s strength.

However, fears of the pandemic’s resurgence and the Sino-American tension seem to guard the quote’s upside. The latest updates from the US suggest that the world’s largest economy continues to flash record high virus cases with numbers from Texas and Florida continues to flash red signals. Elsewhere, figures from Australia’s Melbourne and India are also worrisome and question US President Donald Trump’s tweet saying high testing is behind the surge in the virus figures.

Also challenging the bulls are growing tensions between the US and China, coupled with Beijing-New Delhi tussle. Although the Trump administration is yet to formally announce the sanctions on Chinese diplomats involved in passing the Hong Kong security law, the White House officials hints for a few more punitive measures keep the tension high. Also, two American aircraft will soon be exercising in the South China Sea as Beijing conducts military drills.

Against this backdrop, S&P 500 Futures remain mostly unchanged near 3,130 with the global market waiting for Tokyo open to watch over the US 10-year Treasury yields.

Moving on, New Zealand’s ANZ Commodity Price Index for June, expected 0.0% versus -0.1% prior, could offer additional strength to the bulls if the qualitative catalysts remain supportive. However, downbeat readings from the largest customer Australia, namely TD Securities Inflation and ANZ Job Advertisements, might question further upside. During the US session, markets will be keen to watch the June month ISM Non-Manufacturing PMI which is likely to tease the 50 differentiating point with 49.5 mark against 45.4 prior.

Technical analysis

Considering the pair’s sustained trading above 21-day EMA level of 0.6450, the bulls are all set to challenge the previous month’s top, also the highest since late-January, around 0.6585. Meanwhile, a resistance-turned-support line stretched from June 10, at 0.6480 now, may offer immediate support during the fresh pullback.