- NZD/USD witnessed some follow-through selling for the second straight session on Thursday.
- The prevalent risk-off mood underpinned the safe-haven USD and exerted some pressure.
- Investors now look forward to the US Q4 GDP report for some meaningful trading impetus.
The NZD/USD pair maintained its offered tone through the early European session and was last seen trading around the 0.7125-20 region, just above one-week lows set earlier this Thursday.
The pair extended this week’s retracement slide from the 0.7240-50 supply zone and witnessed some follow-through selling for the second consecutive session on Thursday. The prevalent risk-off environment continued driving some haven flows towards the US dollar and exerted some downward pressure on the perceived riskier kiwi.
Given that a lot of positive news was already priced in, doubts about the timing and size of a new US stimulus package prompted investors to book profits after the recent rally in the equity markets. Adding to this, the reimposition of strict lockdown measures and a delay in COVID-19 vaccine supplies further dampened the market mood.
Adding to this, Wednesday’s dovish sounding FOMC statement fueled worries about the potential economic fallout from the coronavirus pandemic. The US central bank raised concerns about the pace of recovery and said that the ongoing public health crisis poses considerable risks to the economic outlook, which further dented investors’ confidence.
The lower risk appetite was reinforced by the ongoing decline in the US Treasury bond yields. This might turn out to be a key factor capping any further gains for the USD and lend some support to the NZD/USD pair. This makes it prudent to wait for some strong follow-through selling before positioning for any further depreciating move.
Market participants now look forward to the release of the Advance US Q4 GDP growth report, due later during the early North American session. This, along with developments surrounding the coronavirus saga and the broader market risk sentiment, might influence the USD price dynamics and produce some trading opportunities around the NZD/USD pair.
Technical levels to watch
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