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  • The US political uncertainty boosted the safe-haven USD and exerted heavy pressure on NZD/USD.
  • Signs of stability in the equity markets extended some support to the kiwi and helped limit the fall.

The NZD/USD pair remained depressed through the first half of the European trading session and was last seen hovering near the lower end of its daily range, below mid-0.6600s.

The 2020 US election, so far, has been a nail biter of a contest between former Vice President Joe Biden and incumbent President Donald Trump. In fact, early results have indicated a tighter than expected race for the White House as against the market bets for a so-called “blue wave”. This, in turn, forced investors to hedge their positions and prompted some aggressive short-covering around the US dollar.

A strong pickup in the USD demand led to a dramatic intraday turnaround for the NZD/USD pair, which tumbled around 130 pips from daily swing highs, around the 0.6745, or six-week tops touched earlier this Wednesday. As the early volatility subsided, the pair managed to find some support ahead of 0.6600 round-figure mark, albeit struggled to register any meaningful recovery amid the uncertain US political situation.

It is worth mentioning here that results from key battleground states – Wisconsin, Michigan and Pennsylvania – are yet to be declared. Adding to this, Trump raised the possibility of a contested election and said that he would go the Supreme Court to dispute the counting of votes and wants all voting to stop.

That said, some initial signs of stability in the equity markets turned out to be one of the key factors that extended some support to the perceived riskier kiwi. However, the heightened uncertainty might continue to benefit the greenback’s safe-haven status and keep a lid on any attempted recovery move for the NZD/USD pair.

Market participants now look forward to the US economic docket, highlighting the release of the ADP report on private-sector employment and the ISM Services PMI. The data, however, is likely to be overshadowed by the US political developments and fail to provide any impetus to the NZD/USD pair.

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