On Tuesday, the New Zealand dollar fell into negative territory for the third time in a row.
In the midst of the current cautious mentality, a minor increase in USD demand imposed pressure.
During the early part of the European session, the NZD/USD pair extended its intraday losses and fell to four-day lows, around 0.7015-10.
Instead of capitalizing on its slight rise, the pair ran into some new supply near the mid-0.7000s, extending its recent slide from the 0.7100 barrier. This was the third day in a row that the market moved in the wrong direction, aided by some US dollar strength.
The dollar was bolstered by rising expectations that the Federal Reserve may tighten monetary policy sooner rather than later if price pressures continue to worsen. This, together with a slight increase in US Treasury bond yields, acted as a tailwind for the dollar, putting downward pressure on the NZD/USD pair.
Aside from that, the safe-haven USD was bolstered by the pervasive cautious mood, which was fueled by concerns about the spread of the highly virulent delta version of the COVID-19 virus. This was interpreted as yet another element driving flows away from the riskier kiwi.
The NZD/USD pair has squandered some of last week’s big gains with the current run down. Following a breach below the crucial psychological level of 0.7000, the near-term bias will change again in favor of bearish traders, prompting some aggressive technical selling.
However, ahead of Friday’s release of the heavily watched US jobs statistics, investors may want to avoid taking any strong wagers. The well publicized NFP report will have an immediate impact on USD price dynamics and provide the NZD/USD pair a new directional impulse.
Meanwhile, traders are likely to draw cues from the Conference Board’s US Consumer Confidence Index, which was released on Tuesday. The USD will be driven by this, as well as US bond yields and market risk sentiment, resulting in some trading opportunities around the NZD/USD pair.
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