NZD/USD stays pressured towards 0.7000 as coronavirus fears joins pre-Fed anxiety

• NZD/USD kick starts the key week around Friday’s close, keeps two-week downtrend.
• New cases in Waikato, headlines concerning China and Evergrande join tapering tantrums to back the bears.
• Bank holidays in China and Japan could join light calendar to restrict intraday moves, risk catalysts are important for fresh impulse.

NZD/USD begins the key week with the same old sour tone around 0.7035, after declining for the last two weeks.

Fresh COVID-19 infections outside Auckland adds to the downside pressure on the quote while the cautious mood ahead of the US Federal Reserve (Fed) monetary policy meeting and Sino-American tussles, not to forget Evergrande, already weighs on the quote. However, a banking holiday in China and a lack of major data/events at home seem to restrict the Kiwi pair’s immediate moves.

During the weekend, Waikato registers an uptick in covid infections outside New Zealand’s COVID-19 epicenter Auckland. The Pacific nation was up for easing the virus-led emergency alert level for Auckland from currently the highest of 04 to 03 from September 22. However, the latest virus outbreak renews chatters over heightened activity restrictions in Waikato.

Previously, firmer US Retail Sales and softer-than-expected Michigan Consumer Sentiment Index join softer US inflation data to confuse markets over the Fed’s next moves. Before the blackout for policymakers, most of them were pushing for the tapering despite the recent softening of the jobs report.

Read: Fed Preview: Three ways in which Powell could down the dollar, and none is the dot-plot

Elsewhere, the signing of a defense deal by the UK, Australia and the US indirectly teases China and escalates the tension between the western friends and Beijing, which in turn should weigh on the NZD/USD prices due to fears relating to the main customers. Further, China’s Evergrande is flashing red signals for not only domestic markets but to the global real estate developers and the Kiwi pair as well.

Amid these plays, Wall Street closed in red and the US 10-year Treasury yields were firmer by the end of Friday.

Moving on, a bank holiday in China and Japan should restrict intraday moves of the NZD/USD pair. On the same line is an absence of any major data/events at home, which in turn highlights risk catalysts for fresh directions.

Technical analysis

Unless regaining 100-DMA around 0.7075, NZD/USD remains vulnerable to drop towards 50-DMA near 0.7010.