- A broad-based USD strength exerted pressure on NZD/USD for the third straight session.
- Rallying US bond yields, COVID-19 jitters remained supportive of the recent USD rebound.
- A softer risk tone undermined the perceived riskier kiwi and contribute to the selling bias.
The NZD/USD pair edged lower for the third consecutive session and slipped below the 0.7200 mark during the Asian session on Monday.
The pair extended last week’s retracement slide from 33-month tops and witnessed some follow-through selling on the first day of a new trading week. The pullback was sponsored by a combination of factors – the ongoing US dollar recovery and a slight deterioration in the global risk sentiment.
Friday’s disappointing headline NFP print fanned speculations of more US financial aid package and pushed the US Treasury bond yields to their highest level since March. This, in turn, was seen as one of the key factors behind a swift USD rebound from multi-year lows touched last week.
Investors have been pricing in the prospects for a more aggressive US fiscal spending in 2021 following the Democratic sweep in the crucial US Senate runoff elections in the state of Georgia. A ‘blue wave’ will allow the incoming President Joe Biden to pursue his preferred economic policies, including increased direct payments and considerable infrastructure spending.
Meanwhile, concerns about the continuous surge in new coronavirus cases and the imposition of strict lockdown restrictions in Europe/China weighed on investors sentiment. This was evident from a pullback in the equity markets, which provided an additional boost to the safe-haven greenback and drove flows away from perceived riskier currencies, including the kiwi.
With Monday’s downfall, the NZD/USD pair has now erased a major part of the previous week’s positive move. Some follow-through selling below the 0.7175 region should pave the way for an extension of the ongoing corrective slide amid absent relevant market-moving economic releases.
Technical levels to watch
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