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Kiwi tests psychological supports at 0.70

NZD - New Zealand Dollar

The New Zealand dollar softened through trade on Wednesday testing supports at 0.70 US cents amid softness across commodity currencies and risk assets. In what has been a largely quiet trading week, investors appear content in consolidating positions as uncertainty surrounding the pace and timing of global COVID-19 vaccination efforts remains unknown. While the UK, Israel and the US rush to vaccinate their citizenry, logistics delays across Europe and around the world have forced markets to push back expectations of a return to normal. Having touched intraday lows at 0.6998, the NZD clawed back through 0.70 and opens this morning buying just 0.7008 US cents.

With little of note on today’s macroeconomic ticket we anticipate the NZD will remain vulnerable to the recent shift in risk premia. While the broader bias remains positive, short-term headwinds and delays to the global recovery coupled with concerns surrounding rising US yields will likely weigh on the NZD through the days and weeks ahead. We expect support at 0.70 to hold for now with the currency struggling on breaks approaching 0.7120.

Key Movers

The US dollar crept higher through trade on Wednesday advancing against most major counterparts outside the euro. The FOMC minutes offered little to prompt a shift in broader market outlooks, only affirming the Fed's current policy stance and commitment to backward looking policymaking. The euro kept pace with the USD pushing through 1.19 to touch highs at 1.1915 before shifting back toward 1.1870 on open this morning. The GBP continued the weeks struggles giving up 1.38 to touch session lows at 1.3720. Having moved below 1.39 on Tuesday, the sustained weakness remains a mystery as there appears no obvious catalyst for the sterling correction. The only headline event perhaps weighing on the pound was confirmation that the UK medical regulator revised its advice surrounding AstraZeneca’s vaccine suggesting those under 30 should be given an alternative. With the UK’s immunisation program heavily reliant on AstraZeneca’s vaccine, the darkening clouds have perhaps dampened optimism for a speedy post COVID-19 rebuild.

With little of note on the day's macroeconomic ticket our attentions remain with variable market flows. We expect price action across currency markets will remain largely muted, save for an unscheduled news flow shock.

Expected Ranges

NZD/USD: 0.6980 - 0.7070 ▼

NZD/EUR: 0.5870 - 0.6010 ▼

GBP/NZD: 1.9480 - 1.9720 ▲

NZD/AUD: 0.9150 - 0.9230 ▲

NZD/CAD: 0.8790 - 0.8910 ▼