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  • NZD/USD trims late Friday’s losses while keeping bounce off 0.7200.
  • Virus woes escalate, US President Trump plants defiant final week even as Democrats push for his impeachment.
  • US-China tussles intensify, Goldman, Morgan Stanley to delist some Hong Kong products over US ban.
  • China Inflation data, US stimulus headlines will be the key to watch.

NZD/USD drops to 0.7220 during the early Monday’s Asian trading session. Even so, the kiwi pair keeps Friday’s recovery moves from 0.7200 while also struggling to defy the previous two days’ declines. It’s worth mentioning that the coronavirus (COVID-19) woes join the US-China tussle to weigh on the quote off-late despite the US covid aid package hopes favor the bulls.

Virus woes get stronger but not enough to bear the stimulus hopes…

Although the US and the UK mark worrisome increases in the covid numbers, not to forget fears of the virus strain, the downbeat sentiment lacks fall short of winning over expectations of fiscal relief from America. While the record high infections are fashion in Britain and Washington off-late, the covid variants initially found in the UK have been found outside London and challenges the market mood. However, vaccinations are on the rise and some of the key cures like Pfizer-BioNTech claim their medicines can cure the virus strain. Hence, the virus woes are a limited threat to the markets despite a jump in the covid numbers off-late.

Also on the risk negative side is the US-China tension. The Trump administration’s crackdown on Chinese companies recently pushes Goldman Sachs and Morgan Stanley to shun some of the investment products from Hong Kong, per Reuters. It should be noted that America’s latest nearness to Taiwan is also inching Beijing while the US-Hong Kong relations have been the issue the Chinese government hates so far.

On the positive side, Democrats are set to take over the US Government and are gathering support to oust US President Donald Trump faster, due to the alleged inciting of the Capitol Hill attacks. However, President Trump is confident Vice President Mike Pence and members of his cabinet won’t attempt to remove him under the 25th Amendment, per Reuters. It’s worth mentioning that Democrats are up for further stimulus and the odds of which gain extra strength after Friday’s disappointing US employment data for December.

Against this backdrop, S&P500 Futures drop 0.10% while Wall Street benchmarks have been refreshing record highs off-late. Further, the US 10-year Treasury yields are up but gold remains pressured due to the US dollar’s recovery moves and hopes of further stimulus.

Moving on, China’s Consumer Price Index (CPI) and Producer Price Index (PPI) for December, expected 0.1% and -0.8% respectively versus -0.5% and -1.5% prior, will be the key data to watch. Though major attention will be given to the risk catalysts wherein virus updates and US aid package news can be eyed.

Technical analysis

An ascending trend line from November 02, currently around 0.7190, becomes important for NZD/USD sellers. Meanwhile, an upside clearance of the 0.7300 threshold on a daily closing basis could renew buying sentiment.