- NZD/USD gained traction for the second consecutive session on Wednesday.
- Hopes for additional US fiscal stimulus remained supportive of the move up.
- A softer risk tone might cap gains ahead of the US ADP and FOMC minutes.
The NZD/USD pair edged higher through the Asian session on Wednesday and shot to fresh 33-month tops, around the 0.7270 region in the last hour.
The pair added to the previous day’s strong positive move and continued scaling higher for the second consecutive session on Wednesday amid the likelihood of more US financial aid package. Investors have been betting on a Democrat victory in the crucial US Senate runoff elections in Georgia, which would allow the incoming President Joe Biden to pursue his preferred economic policies.
Meanwhile, expectations of larger government borrowing pushed the benchmark 10-year US Treasury yield to the highest level since March and helped ease the recent bearish pressure surrounding the US dollar. This, along with a softer tone in the equity markets and the disappointing release of a slight disappointment from China’s Caixin Services PMI, might cap gains for the NZD/USD pair.
That said, hopes for a strong global economic recovery in 2021 might continue to fuel the underlying bullish sentiment in the financial markets. Apart from this, speculations that the Fed will keep interest rates lower for a longer period might continue to undermine the greenback and support prospects for an extension of the NZD/USD pair’s recent strong bullish momentum.
As investors await the final result of elections in Georgia, Wednesday’s release of the ADP report on the US private-sector employment will be looked upon for some impetus. The key focus, however, will be on the latest FOMC meeting minutes, which will play a key role in influencing the near-term USD price dynamics and help determine the next leg of a directional move for the NZD/USD pair.
Technical levels to watch
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