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  • NZD/USD started retreating from the 0.7225-30 supply zone despite upbeat NZ CPI figures.
  • A pullback in equities benefitted the safe-haven USD and exerted some pressure on the kiwi.

The NZD/USD pair extended its retracement slide from weekly tops and refreshed daily lows, around the 0.7180-75 region during the early European session.

The pair failed to benefit from hotter-than-expected domestic consumer inflation figures, instead met with some fresh supply near the 0.7225-30 resistance zone amid a pullback in the equity markets. In fact, the headline CPI rose 0.5% during the fourth quarter of 2020 and increased 1.4% YoY, both beating consensus estimates.

That said, the imposition of a partial lockdown in China’s capital city of Beijing revived market concerns about the potential economic fallout from the ever-increasing coronavirus cases. This, in turn, weighed on the risk sentiment, which prompted some profit-taking and led to a modest pullback in the equity markets.

This was seen as one of the key factors that extended some support to the safe-haven US dollar and drove flows away from the perceived riskier kiwi. The NZD/USD pair, for now, seems to have stalled this week’s goodish rebound from sub-0.7100 levels touched on Monday and remains at the mercy of the USD price dynamics.

Hence, the key focus will remain on developments surrounding the coronavirus saga, which might continue to influence the broader market risk sentiment and drive demand for the safe-haven USD. Apart from this, the flash version of the US PMI prints for January will also be looked upon for some short-term trading impetus.

Technical levels to watch