NZD/USD rebound toward 0.7000, eyes on US data

• NZD/USD is staging a modest rebound following this week’s sharp decline.
• US Dollar Index stays relatively quiet above 92.50.
• Focus shifts to key macroeconomic data releases from US.

The NZD/USD pair registered its lowest daily close since mid-November at 0.6955 on Wednesday. The kiwi suffered heavy losses after the New Zealand government announced that it will be introducing a new NZD3.8 billion fund to boost the housing supply and curb housing prices.

On Thursday, the pair staged a rebound and was last seen gaining 0.3% on the day at 0.6982. However, in the absence of significant fundamental drivers, this move seems to be a technical correction, suggesting that the pair remains vulnerable to additional losses.

In the meantime, the US Dollar Index is moving sideways above 92.50, making it difficult for NZD/USD to extend its recovery. Later in the session, the US Bureau of Economic Analysis’ fourth-quarter GBP report and the US Department of Labor’s weekly Initial Jobless Claims data will be looked upon for fresh impetus.

NZD/USD technical outlook

Commenting on NZD/USD’s recent action, Westpac analysts said NZD/USD is at risk of sliding towards 0.6800 over the next few weeks with interim resistance forming at 0.7010-40 region.

“Beyond that, we retain a cautiously bullish stance,” analysts added. “We continue to expect global risk sentiment to remain elevated; supported by the unprecedented central bank and government stimulus, as well as vaccine developments. Commodity currencies should strengthen in that environment.”

Key levels to watch for