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  • NZD/USD continued gaining traction for the sixth consecutive session and shot to fresh multi-year tops on Thursday.
  • Powell’s dovish comments, the upbeat market mood weighed heavily on the safe-haven USD and remained supportive.
  • Investors now look forward to the Prelim US Q4 GDP report and Durable Goods Orders data for a fresh trading impetus.

The USD selling picked up pace during the European session and pushed the NZD/USD pair further beyond mid-0.7400s, to the highest level since August 2017.

The pair added to the previous day’s post-RBNZ strong gains and continued scaling higher for the sixth consecutive session on Thursday. The US dollar witnessed some heavy selling through the first half of the trading action, which, in turn, was seen as a key factor fueling the ongoing positive momentum.

The greenback was being weighed down by Fed Chair Jerome Powell’s dovish policy stance. During the second day of congressional testimony on Wednesday, Powell reassured that interest rates would stay low for a long time and that the Fed will keep buying bonds to support the US economic recovery.

Apart from this, the prevalent risk-on environment further undermined the USD’s relative safe-haven status and benefitted the perceived riskier kiwi. Investors remain optimistic about a strong global economic recovery amid the progress in COVID-19 vaccinations and a massive US fiscal spending plan.

In the latest positive developments, the US Food and Drug Administration indicated that it could grant emergency use approval to Johnson & Johnson’s COVID-19 vaccine by the end of this week. Separately, House Majority Leader Steny Hoyer said that the House will vote on the US President Joe Biden’s proposed $1.9 trillion pandemic relief package on Friday or over the weekend.

Meanwhile, the reflation trade, along with rising inflation expectations pushed the yield on the benchmark 10-year US government bond beyond 1.40% for the first time since February 2020. Rallying US bond yields, however, failed to impress the USD bulls or hinder the NZD/USD pair’s strong move up.

Market participants now look forward to the US economic docket, highlighting the release of the Prelim (second estimate) Q4 GDP print and Durable Goods Orders. Apart from this, speeches by influential FOMC members will influence the USD and produce some trading opportunities around the NZD/USD pair.

Technical levels to watch

 

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