- NZD/USD caught fresh bids on Friday and was being supported by weaker USD.
- COVID-19 vaccine optimism undermined the safe-haven USD and benefitted kiwi.
- Overbought conditions on the daily chart warrant some caution for bullish traders.
The NZD/USD pair added to its intraday gains and shot to the highest level since June 2018, around the 0.7030 region during the early European session.
Following the previous day’s consolidative price action, the pair caught some fresh bids on the last trading day of the week and built on its recent strong positive momentum. The optimism over a potential vaccine for the highly contagious coronavirus disease remained supportive of the upbeat market mood. This, in turn, weighed on the safe-haven US dollar and continued driving flows towards the perceived riskier kiwi.
The NZD got an additional boost from NZ Treasury’s weekly report, citing upside risk to the GDP growth forecasts based on the latest jump in retail sales data. The report also mentioned, “Card spending has shown a steady recovery in November after some volatility, and the number of people receiving income support continues to fall.”
Meanwhile, the greenback was further weighed down by reviving hopes for more fiscal stimulus from the incoming Biden administration amid concerns about the economic fallout from the ever-increasing COVID-19 cases. The market worries resurfaced following the release of US Initial Weekly Jobless Claims on Wednesday, which suggested that the imposition of new restrictions in several US states is undermining the labour market recovery.
Apart from this, a fresh leg down in the US Treasury bond yields exerted some additional downward pressure on the buck and assisted the NZD/USD pair to find acceptance above the 0.7015 region. Hence, the ongoing positive move could further be attributed to some technical buying above the mentioned barrier. However, overstretched conditions on the daily chart warrant some caution before placing fresh bullish bets.
There isn’t any major market-moving economic data due for release from the US. Hence, the broader market risk sentiment will continue to play a key role in influencing the USD price dynamics and assist traders to grab some meaningful opportunities.
Technical levels to watch
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