NZD/USD stays calm near 0.6560 despite broad USD weakness

• NZD/USD continues to trade in a tight range on Tuesday.
• US Dollar Index drops to lowest level in more than two years.
• Building Permits and Housing Starts data will be released from US.

The NZD/USD pair is struggling to make a decisive move in either direction on Tuesday and continues to trade flat near 0.6560.

NZD and USD both remain on the back foot

Despite the broad-based USD weakness, NZD/USD failed to gain traction as concerns over the coronavirus outbreak in New Zealand and heightened US-China geopolitical tensions weigh on the kiwi. Earlier in the week, New Zealand’s Prime Minister announced that they have decided to delay the general election from September 19th to October 17th.

Meanwhile, following the US Commerce Department’s decision to add 38 more Huawei affiliates to the US economic blacklist on Monday, China’s Foreign Ministry reiterated that they strongly oppose the US suppression of Chinese technology firms.

On the other hand, the sharp drop witnessed in the US Treasury bond yields makes it difficult for the greenback to find demand on Tuesday. With the US Dollar Index slumping to its lowest level since May 2018 at 92.48, NZD/USD’s downside remains limited.

Later in the day, Housing Starts and Building Permits data will be featured in the US economic docket. Investors are likely to ignore this data and remain focused on the US T-bond yields. A recovery in the T-bond yields could help the USD gather strength in the second half of the day and force the pair to start pushing lower.

Technical levels to watch for