NZD/USD: Bears return to take controls around mid 0.6900s on Fed day
- NZD/USD remains pressured following the heaviest daily losses in over a week.
- Slump in Chinese stocks, firmer US data and covid woes weigh on Antipodeans.
- Fed is expected to keep monetary policy unchanged, tapering comments eyed.
- Australia Q2 CPI, virus updates and news from China will be important too.
NZD/USD portrays the risk-off mood as the US Federal Reserve (Fed) officials roll up their sleeves to rock the markets. That said, the kiwi pair holds lower ground near 0.6960 amid early Wednesday morning in Asia.
Be it China stocks’ south-run or upward revision to the previous readings of the US data, not to forget Delta coronavirus variant fears in Asia and the Sino-American tussles, NZD/USD had to bear it all ahead of the key Federal Open Market Committee (FOMC) verdict. The sour sentiment pulled the US Dollar Index (DXY) back from a two-week low amid the US afternoon trading session.
Although US Durable Goods Orders and housing numbers came in softer-than-expected for June and May respectively, the notable upward revision to the priors renewed bets that the Fed hawks have scope. Also on the same line could be the strong readings of US CB Consumer Confidence figures that jumped to the pre-pandemic levels, to 129.10 for July.
Elsewhere, Beijing’s crackdown on technology and education stocks joins Australia’s mixed feelings over the covid, after witnessing a fresh high of infections in 10 months, to weigh on the market’s mood and New Zealand dollar (NZD) as well. It’s worth noting that the US-China tension gets heating day-after-day, recently over US restrictions on Chinese diplomats’ visas and relations with Taiwan, which in turn exerts additional downside pressure on the NZD/USD prices, mainly due to New Zealand’s close trading links with China.
Amid these plays, Wall Street closed lower, reversing Monday’s gains, whereas the 10-year Treasury yields dropped 3.7 basis points (bps) to 1.239% by the end of Tuesday’s North American trading session.
Looking forward, a lack of data/events at home keeps NZD/USD at the mercy of trans-Tasman developments. The same highlights covid updates and Australia’s Consumer Price Index (CPI) for the second quarter (Q2), expected 0.7% versus 0.6% QoQ and 3.8% versus 1.1% YoY.
Above all, the Fed meeting will be crucial for today as the art of the policymakers to reject tapering concerns and still not sound bearish will be a test, which if passed can refresh the yearly low of NZD/USD.
Read: Fed Interest Rate Decision Preview: The horns of a inflation dilemma
Technical analysis
A U-turn from the monthly resistance line, near 0.7010, directs NZD/USD bears to 0.6920-15 support confluence comprising multiple lows marked since June 18.