NZD/USD slides back below 0.7050 amid broad USD recovery

• NZD/USD has slipped beneath the 0.7050 level in recent trade amid a broad pickup in the US dollar.
• The kiwi is set to conform to USD and global risk appetite dynamics for the rest of the week

NZD/USD has been on the back foot in recent trade, with the pair sliding below the 0.7050 level amid a broad-based pickup in USD in the lead up to and in wake of the 4pm London Fix. The pair currently trades lower by 0.9% or around 60 pips, with NZD the underperforming G10 currency on the day.

USD picks up, NZD flails

There does not seem to be any reason in particular for NZD underperformance this Tuesday. Further strength in the AUD/NZD pair that took it briefly above the 1.0700 level for the first time since early November following strong Australian November retail sales numbers released during Asia Pacific trade might be weighing on the kiwi. Over the last few days, the pair has managed to nudge to the north of its 50 and 200-day moving averages at 1.0616 and 1.0670 respectively, above which AUD/NZD remains well supported now.

In terms of the recent uptick in demand for the US dollar that has pushed the Dollar Index (DXY) back above the 90.50 level, there does not seem to be anything in particular behind this either. One could argue that ongoing concerns regarding the spread of this new, more transmissible strain of Covid-19 in the UK and the subsequent lockdowns and travel bans are a cause for concern that is increasing demand for the safe-haven USD. Meanwhile, recent public pushback from EU Brexit Negotiator Michel Barnier against the UK’s recent new offer on fisheries (he said the offer was unacceptable and just going around and around what we’ve already heard) seems to be weighing on GBP and feeding into the stronger buck.

In terms of what lies ahead for the kiwi; amid a lack of any pertinent domestic New Zealand economic events, kiwi traders will be firmly fixated on global events for the rest of the week, most likely regarding the pandemic and Brexit.