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Kiwi survives second test of 0.71 US cents as negative emerging market sentiment continues to drive direction

NZD - New Zealand Dollar

The New Zealand dollar tracked lower through trade on Monday as risk aversion and US dollar strength forced the currency toward supports at 0.71 US cents. Having touched intraday highs at 0.7192 a risk off mood permeated financial markets through the Asian trading session prompting another run-on emerging market and commodity pared currencies. With bonds and yields continuing to rise support for the USD is gaining momentum adding further pressure on the NZD. Having touched intraday lows at 0.7105 the NZD tracked sideways through much of the overnight session creeping marginally higher into this morning’s open.

With little of significance on today’s macroeconomic docket our attentions remain with the current narrative and reaction to bond prices. Unless we see a significant shift away from the current focus on bond and treasury yields any uptick in momentum will be hard won. We continue to watch supports at 0.71 with a break below this handle opening the door for deeper downward correction.

Key Movers

The US dollar enjoyed strong gains through the start of the week as investors carried the momentum from the freshly signed fiscal stimulus bill into a new week while capitalising on further gains across bonds and US treasury yields. Emerging market and commodity pared currencies came under sustained pressure while the JPY and Euro underperformed. The Euro tested three and a half year lows breaking below 1.1850 as the single currency came under sustained pressure amid a slower vaccine rollout. Markets largely ignored reports Germany’s pace of immunisation was expected to increase with as many as 10 million Germans to receive Covid inoculations per week, perhaps an optimistic target given only 7.3 million have received the vaccine to date.

With little of note on today’s economic docket the current underlying narrative and bond prices will continue to drive direction.

Expected Ranges

NZD/USD: 0.7080 - 0.7190 ▼

NZD/EUR: 0.5980 - 0.6050 ▼

GBP/NZD: 1.9180 - 1.9520 ▲

NZD/AUD: 0.9250 - 0.9350 ▼

NZD/CAD: 0.8980 - 0.9110 ▼