NZD/USD starts in early Asia better offered

• NZD/USD is on the verge of a break of critical support depending on the US dollar.
• The divergence between the Fed and RBNZ is being monitored. 

NZD/USD was starting out in early Asia down some 0.50% after falling from a high of 0.6951 to a low of 0.6868.

The bird has been under pressure following a combination of the delta variant being detected in New Zealand followed by a surprise hold at the central bank that decided not to hike rates. 

Some traders covered longs in the build-up to the the event in speculation that the Reserve Bank of New Zealand would need to consider holding off which already sank the kiwi ahead of the announcements. 

The Kiwi recovered on the hawkish tone of the MPS but remained under pressure due to the uncertainty over the Delta variant of coronavirus. 

''On the one hand, it’s clear that the RBNZ needs to, and probably will hike soon, and that having gone hard early, NZ will likely crush Delta,'' analysts at ANZ Bank explained.

''But on the other hand, Delta is escalating quickly (and likely at a rate few expected) and that’s shaken nerves. Markets are now pricing in 85bp of hikes by May – that’s shy of the 100bp we expect, but then the risks are quite clearly skewed to less.''

''What’s priced in is thus arguably lofty, so it’s hard to expect interest rates to add further support to the NZD, and odds are that good news could be some weeks off.''

Meanwhile, the US dollar is holding up in the important 93 area as measured in the DXY index.

The event for the week came and went with little in the way of price action nor a shift in the general sentiment in the market surrounding central bank divergences.

The Federal Open Market Committee minutes for the July meeting confirmed that members are looking at not if but when the Fed will start to taper. 

''Fed officials focused on anticipated QE tapering at the July FOMC meeting, but most of them are not in a rush for action,'' analysts at TD Securities explained. 

''The minutes make a taper announcement as soon as the September meeting is highly unlikely, in our view. We continue to forecast a formal taper announcement in December, although November remains possible if the next two employment reports are unexpectedly strong.''

NZD/USD technical analysis

The price is stable in a critical support zone. 

However, an advancement in the greenback through a critical confluence of resistance in the DXY, above 93.50,  would likely see the bord break to the next boundaries below and test 0.6750.