NZD/USD sellers attack 0.6700 as Russian headlines widen risk-off mood
|- NZD/USD steps back after refreshing monthly high, pressured of late.
- Russia’s identification of Donetsk and Luhansk as separate states, ordering troops for peacemaking recently weighed on sentiment.
- NZ PM Ardern released details of Step 1 for unlocking, pre-RBNZ optimism initially favored kiwi bulls.
- Full markets, US PMI eyed for intraday directions but risk catalysts are more important.
NZD/USD began the trading week on a firmer footing before the latest pullback dragged it down to 0.6700 during the early hours of Tuesday morning in Asia.
The kiwi pair initially cheered hawkish hopes from the Reserve Bank of New Zealand (RBNZ) and news over the Biden-Putin meeting before Russian President Vladimir Putin’s actions roiled risk appetite. It’s worth noting that an off in the US and Canada curbed the market’s reaction to the anti-risk headlines.
With sustained improvement in New Zealand’s headlines inflation and jobs report, the RBNZ is well-set for a 0.25% rate hike and the chatters over 50 basis points (bps) of a lift aren’t off the table. Though, a faster spread of the covid in the Pacific nation joins geopolitical risks to test the bulls. On Monday, New Zealand (NZ) Prime Minister Jacinda Ardern unveiled “Step 1” of her five-step total unlock from the covid-led restrictions, including the border openings, which in turn offered extra tailwind to the NZD/USD prices before the risk-off mood weighed on the quote.
Reuters came out with the news conveying that Russia has the right to build and establish military bases in eastern Ukraine under a new agreement with separatist leaders. A few hours prior, Russian President Putin recognized Donetsk and Luhansk in Eastern Ukraine as independent states and signed a decree "on friendship and cooperation," which in turn triggered risk-aversion and weighed on the Antipodeans like NZD/USD. Also on the negative side were comments from Putin who turned down optimism over his meeting with US President Joe Biden by signaling no concrete plans for the summit.
Elsewhere, Federal Reserve Board Governor Michelle Bowman followed the tunes of Chicago Fed President Charles Evans and New York Federal Reserve Bank President John Williams while saying, “It is too soon to tell if the Fed should hike 25 or 50bps in March.”
Amid these plays, the US and European stock futures remain downbeat and the bund yields stay firmer.
Moving on, New Zealand’s Credit Card Spending for January, prior 1.2% YoY, will offer intermediate moves ahead of the preliminary US PMIs for February. However, major attention will be given to the full markets’ reaction and geopolitical headlines for clear direction.
Read: US Markit PMIs Preview: Services sector has room for upside surprise, boosting the dollar
Technical analysis
NZD/USD recently failed to cross the 0.6730-35 resistance confluence, including the 50-DMA and a descending trend line from October 28. However, firmer RSI and bullish MACD signals keep the buyers hopeful until the quote drops below a three-week-old support line, near 0.6630.
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