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  • NZD/USD bears catch a breather around one-week low after the heaviest drop in a year.
  • Auckland moves back to Alert Level 3, with the rest of New Zealand to Level 2, amid covid resurgence.
  • RBNZ’s clarification on remit, intact support to status-quo couldn’t placate bulls.
  • China’s Caixin Manufacturing PMI, New Zealand COVID-19 numbers and US dollar moves should be watched carefully.

NZD/USD wavers around 0.7235-40 after the week-start uptick during Monday’s Asian session. The kiwi pair dropped the biggest since March 2020 on Friday as RBNZ’s Orr couldn’t placate bears while the US dollar strength exerted additional downside on the quote. Even so, the recent vaccine news from the US seems to dim the impact of Auckland’s fresh lockdown and a nine-month low of China’s NBS Manufacturing PMI, unveiled during the weekend.

Vaccine optimism battles bears…

RBNZ Governor Adrian Orr struggled to defy hopes of any monetary policy tightening on Friday after the Kiwi central bank was pushed to care for housing and government policies the previous day. The RBNZ Chief Orr clarified the central bank’s readiness to keep the policies unchanged for a longer period.

Even so, the markets seemed unconvinced as the US flashed multiple upbeat figures backing reflation fears and propelled the US dollar index to mark the biggest jump in over six months. Also favoring the greenback could be its safe-haven allure and hopes of a $1.9 trillion covid stimulus to be passed by March 14.

It should, however, be noted that the US Food and Drug Administration’s (FDA) approval of Johnson and Johnson’s one-shot coronavirus (COVID-19) vaccines for emergency use offered a ray of hope of the markets off-late. The reason could be traced from New Zealand’s fresh lockdown announcement during the weekend. As per the latest release, Auckland is back in Alert Level 3 for the next seven days from Sunday whereas the rest of New Zealand will also witness Level 2 activity restrictions. Also negative for the NZD/USD prices, which was also ignored, could be China’s NBS Manufacturing PMI for February that dropped to the lowest in nine months to 50.6 versus 51.1 forecast and 51.3 prior.

Looking forward, the Reserve Bank of Australia’s (RBA) surprise bond purchase and virus conditions at home can weigh on the quote while waiting for China’s Caixin Manufacturing PMI, expected to reprint 51.5 level. However, the US dollar moves and Treasury yields should be watched closely for fresh impulse.

Technical analysis

While a downside break below 21-day EMA, at 0.7255 now, directs NZD/USD to the south, a confluence of 50-day EMA and an ascending trend line from December 21 near 0.7190 will be a tough nut to break for the bears.

 

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