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NZD/USD: Looks for a clear direction around 0.6600 after a two-day rise

  • NZD/USD consolidations the previous gains in a choppy range between 0.6600 and 0.6610.
  • New Zealand Q2 PPI dropped to -0.3%, GDT Price Index recovered.
  • Virus woes tighten the grip amid Sino-American tension.
  • US dollar weakness, increasing odds of American stimulus add strength to the pair.

NZD/USD takes rounds to 0.6600-10 amid the early Wednesday morning in Asia. The kiwi pair has been trading sideways since the day’s start as fresh challenges to the risk confront the previous optimism backed by weaker US dollar and hopes of further economic help from America.

What’s brewing?

Following the recovery in New Zealand’s GDT Price Index, from -5.1% to -1.7%, the second quarter (Q2) Producer Price Index (PPI) data slumped to -0.3% from +0.1% prior. Earlier in the week New Zealand’s Business NZ PSI also softened.

Despite the downbeat data, the pair surged to the highest in one-week as the US dollar index (DXY) refreshed 26-month low while flashing 92.12 as a quote on Tuesday. Also supporting the pair’s upside could be the news that US House Speaker Nancy Pelosi is ready to cut the Democratic demand for the coronavirus (COVID-19) relief bill into the half.

Alternatively, US President Donald Trump’s dislike for China joins the virus outbreak in the Pacific nation to challenge the bulls. While American President Trump said he postponed talks with China and doesn’t walk to talk, for now, the latest tally suggests 13 new virus cases in New Zealand.

While considering the mixed catalysts, analysts at the Australia and New Zealand Banking Group said, “The overnight rally in the Kiwi smells of a good old-fashioned short squeeze with no obvious explanation for the way it outperformed other correlated currencies. The USD has generally softened on buoyed risk appetite as equities press higher but the NZD has performed better than all of its G10 peers, and that’s despite falling milk prices, and the RBNZ extremely dovish stance and signaling of a move to negative rates.”

Against this backdrop, S&P 500 Futures rise 0.05% to 3,388 after its Wall Street benchmark refreshed record high the previous day.

Looking forward, a lack of major data ahead of the US FOMC minutes can keep the risk catalysts in the driver’s seat. Herein, pandemic updates and news concerning the US-China tussle will be the key to follow.

Technical analysis

Having successfully cleared a 21-day EMA level of 0.6593, NZD/USD prices can aim for August 11 top near 0.6630 during the further rise ahead of confronting the monthly top near 0.6690. Alternatively, 50-day EMA around 0.6530 becomes the key support to watch.

 

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