- NZD/USD remained under heavy selling pressure for the fourth successive session.
- The risk-off impulse was seen as a key factor weighing on the perceived riskier kiwi.
- The ongoing strong USD positive move to fresh YTD tops contributed to the decline.
The NZD/USD pair continued losing ground through the first half of the European session and tumbled to the 0.6800 neighbourhood, or the lowest level since November 2020.
The pair extended this week's retracement slide from the 0.7045-50 supply zone and remained under intense selling pressure for the fourth consecutive session on Thursday. The fast-spreading Delta variant of the coronavirus has rattled the market's nerves. This was evident from a selloff in the global equity markets, which, in turn, drove flows away from the perceived riskier kiwi.
Meanwhile, the risk-off impulse boosted the safe-haven demand for the US dollar, which was further underpinned by expectations that the Fed will begin tapering its bond purchases later this year. The minutes of the July 27-28 FOMC meeting – released on Wednesday – revealed policymakers' assessment that progress was made towards the maximum-employment and price-stability goals.
The minutes also showed that several Fed officials thought that a move to start tapering asset purchases should start next year. Nevertheless, market participants seemed convinced that the Fed is now comfortable to roll back the crisis-era stimulus. This continued acting as a tailwind for the USD and helped offset a sharp intraday decline in the US Treasury bond yields.
Apart from this, the downfall could further be attributed to some technical selling following the previous day's post-RBNZ bearish break below the 0.6920-0.6900 congestion zone. However, extremely oversold conditions on hourly charts held traders from placing fresh bearish bets and helped the NZD/USD to find some support near the 0.6800 mark, at least for now.
Market participants now look forward to the US economic docket, featuring the releases of the Philly Fed Manufacturing Index and Initial Weekly Jobless Claims. The data might influence the USD price dynamics later during the early North American session. Traders will further take cues from the broader market risk sentiment for some short-term opportunities around the NZD/USD pair.
Technical levels to watch
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