NZD/USD recovers from weekly lows in 0.7170s back to mid-point of weekly range above 0.7200

• NZD/USD has recovered sharply from pre-US trading session lows in the 0.7170s after finding support at Monday’s low.
• The rally from lows came primarily as a result of road USD weakness.

NZD/USD has recovered sharply from pre-US trading session lows in the 0.7170s, the pair seemingly having found strong support around Monday’s low and last Friday’s early European session high at 0.7180. Note also that the 21-day moving average also sits at 0.71858, which also likely offered some support.

Friday’s price-action confirmed this week’s rangebound conditions, with NZD/USD now having seen a double bottom around 0.7180 this week and a double top in the 0.7250s. Looking ahead, as the consolidative conditions that have prevailed this week break down, a break of either side of this range could act as an indicator of near-term direction.

Driving the day

NZD/USD rose from lows primarily as a result of broad USD weakness which was also seen across other USD major exchange rates on Friday. At present, the pair still trades around 0.1% lower on the day close to 0.7220, despite New Zealand PM Ardern announcing during the Asia Pacific session that the country’s first batch of the Pfizer/BioNTech vaccine would be arriving next week, earlier than expected. Though that may be good news, the country is still well behind other major developed economies in terms of their vaccine rollout (having not actually even started yet!).

USD stumbles into the weekend

As noted, USD has taken a bit of a tumble during the final US trading session of the week. No theme or piece of news, in particular, has been behind the move on Friday, but the fact that the current global political and economic backdrop remains positive for risk appetite is likely weighing; 1) pandemic news has been good (data from Israel shows remarkable efficacy of the vaccines and vaccination rollouts continue at a pace whilst infection rates are dropping), 2) US fiscal stimulus news has been good (Senate Democrats are likely to bypass the Committee stage thus fast-tracking the Biden administration’s $1.9T package towards bringing signed as early as 14 March) and 3) central bank’s (namely the Fed) continue to reassure that their ultra-accommodative monetary policy stances aren’t going to change any time soon (Fed Chair Jerome Powell and other Fed member have come across as very dovish this week).

As a result of the above, global stocks equities continue to at or close to cycle (or all-time) highs, commodities remain underpinned (in fact, crude oil is absolutely gunning it to the upside to finish the week in a flurry). This has not been a good environment for safe-haven assets which probably partly explains why USD has not been performing so well. Bonds have been selling off on Friday in the US and in Europe as a result of the lack of demand for haven assets and as a result of higher inflation expectations. Higher nominal yields have not helped the US dollar that much, largely given real yields have not rallied nearly as much (real yields being the real bond market driver of USD).