NZD/USD drops to fresh session lows, around 0.6960 area
- NZD/USD failed to preserve its modest intraday gains amid the risk-off impulse in the markets.
- COVID-19 jitters weighed on investors’ sentiment and undermined the perceived riskier kiwi.
- Sliding US bond yields kept the USD bulls on the defensive and might help limit the downside.
The NZD/USD pair surrendered its modest intraday gains and was last seen hovering near daily lows, around the 0.6965-60 region heading into the European session.
The pair struggled to capitalize on its early modest uptick, instead met with some fresh supply near the 0.6985 area and was pressured by the risk-off impulse in the markets. Worries about the potential economic fallout from the fast-spreading Delta variant of the coronavirus weighed on investors' sentiment. This was evident from a generally weaker tone around the equity markets, which acted as a headwind for the perceived riskier kiwi.
The downside, however, remains cushioned, at least for the time being, amid a subdued US dollar price action, which, to a larger extent, offset the negative factor. Despite persistent COVID-19 jitters, the USD struggled to attract any safe-haven demand amid a fresh leg down in the US Treasury bond yields. This, in turn, was seen as a key factor that extended some support to the NZD/USD pair and might help limit any further losses.
Investors also seemed reluctant to place any aggressive bets, rather preferred to wait on the sidelines ahead of this week's key event risk – the FOMC monetary policy meeting starting Tuesday. The outcome will influence the USD price dynamics in the near-term and help determine the next leg of a directional move for the NZD/USD pair.
In the meantime, developments surrounding the coronavirus saga will drive the broader market risk sentiment. This, along with the US bond yields, will impact the USD demand and contribute to produce some trading opportunities around the NZD/USD amid absent relevant market-moving economic releases.
Technical levels to watch