NZD/USD rebounds above 0.6660 as USD selloff intensifies

• NZD/USD turned north after dropping to 0.6620 area on Thursday.
• US economic activity contracted at a record pace in second quarter.
• US Dollar Index closes in on 93.00 in American session.

The NZD/USD pair dropped to 0.6620 during the European trading hours as the USD capitalized on risk-off flows and gathered strength against its rivals. However, with the greenback facing heavy bearish pressure in the second half of the day, the pair erased the majority of its daily losses and was last seen trading at 0.6664, where it was down only 0.04% on the day.

USD fails to preserve its strength

Earlier in the day, the sharp fall witnessed in major European equity indexes helped the greenback find demand as a safe-haven. The US Dollar Index (DXY), which extended its slide after the FOMC’s policy announcements on Wednesday, staged a convincing rebound and rose to 93.68 ahead of the American session.

However, with the US Treasury bond yields turning south following the growth data from the US, the DXY lost its traction and slumped to its lowest level in more than two years at 93.06.

In its flash estimate, the US Bureau of Economic Analysis announced that the real Gross Domestic Product (GDP) in the US contracted at a record pace of 32.9% on a yearly basis in the second quarter. Although this reading came in slightly better than the market expectation of -34.1%, it forced investors to seek refuge and ramped up the demand for safe-haven T-bonds. 

At the moment, the 10-year US T-bond yield is down 5.55% on the day and the DXY is losing 0.17% at 93.10.

In the early Asian session on Friday, the ANZ’s Roy Mordan Consumer Confidence Index data from New Zealand will be looked upon for fresh impetus.

Technical levels to watch for