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  • A softer tone surrounding the USD assisted NZD/USD to continue gaining traction on Tuesday.
  • The uncertain US political environment was seen as a key factor weighing on the greenback.
  • Coronavirus jitters might lend some support to the safe-haven USD and cap gains for the pair.

The NZD/USD pair shot to fresh five-week tops during the early North American session and was now looking to extend the momentum further beyond the 0.6700 mark.

The pair built on last week’s goodish rebound from mid-0.6500s and continued gained traction through the major part of the trading action on Tuesday. The US dollar edged lower amid the uncertain US political environment, which, in turn, was seen as one of the key factors driving the NZD/USD pair higher.

Investors might have started pricing in a strong victory for Democrat candidate Joe Biden at the upcoming US presidential election on November 3. However, the incoming polls have been indicating a narrow difference in certain key swing states, which fueled uncertainty about the actual outcome and weighed on the buck.

However, growing market worries about the potential economic impact of fresh lockdown measures to curb the second wave of coronavirus infections weighed on investors’ sentiment. This, along with the slow progress in the US stimulus talks further dampened the market mood and helped limit any sharp fall for the safe-haven USD.

The greenback remained depressed and failed to gain any respite from Tuesday’s upbeat release of US Durable Goods Orders data. In fact, the headline orders recorded a strong growth of 1.9% MoM in September while orders excluding transportation increased by 0.8% as against the anticipated growth of 0.5% and 0.4%, respectively.

From a technical perspective, the NZD/USD pair already seems to have found acceptance above the 0.6670 supply zone. Hence, some follow-through strength towards the 0.6755-60 region, en-route the 0.6800 round-figure mark, now looks a distinct possibility. The latter coincides with September monthly swing highs, which if cleared should pave the way for additional gains.

Technical levels to watch