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NZD/USD posts 10th consecutive week of gains

NZD - New Zealand Dollar

The New Zealand dollar was the days big looser giving up 0.72 US cents to touch intraday lows below 0.7150. with little of note on the domestic docket the NZD succumbed to a broader US dollar rebound, with investors looking to trim recent bearish bets on widening treasury yields and hopes for a larger swathe of fiscal support. Having touched a near three year high last week the NZD has come under some short-term pressure as investor focus through the last three session has been drawn back to the world’s base currency. Investor focus appears to be shifting away from inflation and monetary policy expectations relieving some of the pressure that prompted the recent USD downturn and opening the door for a larger NZD correction. Our attentions now shift toward yield performance as a key marker of direction with a break above November dollar index highs at 91.55 a signal there may be more room to downside for the NZD.

Key Movers

The US dollar extended last weeks gains through trade on Monday, lifted by a falling Euro and expectations for an increase in fiscal support. Having touched near three year lows at the beginning of last week the narrative has shifted through the last 3 sessions as investors begin to move away from inflation and monetary policy expectations toward hopes for a vaccine lead rebound and higher treasury yields. With Democrats now controlling both the House and the Senate markets are beginning to price in an increase to pandemic relief. While additional government spending would ordinarily hamper US dollar gains, widening treasury yields have helped cap losses and drive dollar support. While the shift in direction has not yet undermined the broader downward narrative there is now scope to suggest the US dollar could recouping losses through the medium term.

The Euro moved toward 3-week lows, giving up highs above 1.23 to shift to session lows at 1.2154, while sterling drifted to intraday lows at 1.3450.

With little of note on the global macroeconomic docket our attentions remain with the broader narrative. We will be watching treasury yields as an early marker for shifts in direction through the sessions ahead. A further widening in US treasury yields and a break above November highs could prompt further US dollar upside.

Expected Ranges

NZD/USD: 0.7090 - 0.7230 ▼

NZD/EUR: 0.5850 - 0.5920 ▼

GBP/NZD: 1.8680 - 1.8920 ▲

NZD/AUD: 0.9270 - 0.9390 ▼

NZD/CAD: 0.9120 - 0.9220 ▼