- NZD/USD's reversal from 0.6500 extends to 0.6400 approaching two-week lows at 0.6375.
- The kiwi loses ground against a stronger US dollar amid fears of a new COVID-19 wave.
- Next week all eyes will be on the RBNZ monetary policy meeting.
The New Zealand dollar has traded lower for the second consecutive day on Friday, extending its pullback from 0.6505 highs earlier this week to 0.6400 area, approaching two-week lows at 0.6375. US dollar strength amid a moderate risk aversion has weighed on the pair, which is set for a 0.5% decline this week.
NZD extends loses amid broad-based dollar strength
Kiwi's demand has been weighed by investors' concerns that a second wave of COVID-19 would cripple economic recovery. The increase of infections in several US states and the new outbreak in China have boosted fears of another global lockdown. Beyond that, the geopolitical tensions between China and India have contributed to deteriorating market sentiment further, which has pushed the USD to three-week highs against a basket of the most traded currencies.
At a domestic level, macroeconomic data has failed to offer support to the NZD, even though it did not exert a significant impact on the currency. New Zealand Gross Domestic Product contracted at a 1.6% pace in the first quarter of the year, well above market expectations of a 1% drop.
Next week all eyes will be on the Reserve Bank of New Zealand, which is expected to hold its monetary policy meeting. The RBNZ is widely expected to hold its Official Cash Rate at 0.25% yet any comments about the bank’s forward guidance or the economic outlook might have repercussions on the NZD.
NZD/USD needs to break the 0.64-0.65 range to signal direction - Westpac
From a wider point of view, the pair remains trading within a 100-pip range, between 0.6400 and 0.6500 which, according to the FX Analysts team at Westpac should be broken in order to define a near-term direction, “NZD/USD has been in consolidation mode around 0.6450 over the past week and looks neutral for the week ahead. Technically, a break of either 0.6400 (bearish) or 0.6500 (bullish) is required to signal multi-week direction.”
NZD/USD key levels to watch
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