NZD/USD stays on the defensive around 0.7100 amid sour sentiment

• NZD/USD consolidates gains marked during the last three weeks in a choppy range.
• Market sentiment worsens as covid, tapering fears escalate.
• US-China, Iran headlines fail to convince the bulls.
• NZ decision on alert levels will be observed for immediate directions.

NZD/USD kick-starts the week’s trading without any surprises, keeping the previous week’s bearish consolidation around a three-month high. That said, the kiwi pair remains pressured near 0.7115 amid early Monday morning in Asia.

Although hopes of faster vaccinations challenged bears, growing fears of the US Federal Reserve’s (Fed) monetary policy tightening amid recently high covid numbers in the developed economies, weighed on the NZD/USD prices of late.

Adding to the sentiment-positive news was the phone call between US President Joe Biden and his Chinese counterpart Xi Jinping, as well as the hope of a nuclear peace by Iran. Even so, cautious sentiment ahead of this week’s key data calendar and the next week’s Federal Open Market Committee (FOMC) meeting, not to forget today’s decision over the virus-led activity restrictions on New Zealand (NZ) keep traders on the edge.

US President Joe Biden’s six-pronged strategy raised hopes that the world’s largest economy will quickly overcome the pandemic with the targeted tough measures pushing towards more vaccinations and mask mandate. The Democratic Party member said, “This is not about freedom or personal choice. It is about protecting yourself and those around you.”

On a different page, the White House and Chinese media both confirmed a first phone call between the US and Chinese leaders after February. Although the US media tries to keep it sober, China cited improvement in relations and raised hopes of overcoming the long-standing cold war among the world’s top two economies. Additionally, news that the United Nations (UN) Nuclear watchdog Chief cited a major communication breakdown with Iran that was solved on a trip to Tehran also challenged the NZD/USD bears.

Alternatively, a jump in the US Producer Price Index (PPI) to refresh the series record in August with 8.3% YoY and 10.8% three-month saar outcome joined the Fed policymakers’ hawkish tone ahead of this week’s blackout period to back the tapering concerns. It should be noted that this week’s Consumer Price Index (CPI) becomes the key data after the August jobs report’s disappointment tamed monetary policy adjustment fears during the early month.

At home, the government is up for conveying their verdict on the alert levels after keeping Auckland on the higher activity restrictions’ side and easing controls outside the last week. Given the mostly steady covid numbers, market players expect an easing in the virus-led local lockdown measures, which in turn can help the NZD/USD stay above the 0.7100 levels. A light calendar on Monday also highlights risk catalysts for fresh impulse.

Technical analysis

Despite failures to reach the 0.7200 during an uptrend from late August to early September, 100-DMA around 0.7080 restricts the short-term downside of the NZD/USD prices.