- AUD/NZD remains on the back foot for third consecutive day.
- Wider covid-led restrictions in Australia, travel bubble news favor bears.
- Risk appetite sours amid subdued trading hours, reflation fears, covid woes can be blamed.
- Lack of major data/events, keep risk catalysts as the key driver.
AUD/NZD fades bounce off intraday low around 1.0735 amid a sluggish Asian session on Monday. The cross-currency pair bears the burden of the worsening coronavirus (COVID-19) conditions in Australia. Also weighing on the quote could be the comparatively less bearish RBNZ than the RBA.
With 30 new covid cases in Australia’s New South Wales, the government announced extra measures to curb the virus resurgence. “An expanded lockdown now covers 5m people in Greater Sydney, as well as the Blue Mountains, Central Coast and Wollongong. Cases of the highly infectious Delta variant now stand at 110,” said the BBC.
The jump in covid cases also led New Zealand to suspend the travel bubble with Australia, canceling over 85 flights. It’s worth noting that Wellington remains on the Level 2 alert for another 48 hours even as there are no fresh covid cases registered recently.
In addition to the covid woes, the Reserve Bank of Australia’s (RBA) sustained support for easy money contrasts the increasing odds of the Reserve Bank of New Zealand’s (RBNZ) rate hike in early 2022 to weigh on the AUD/NZD prices.
On the broader front, the Fed’s rejection of reflation fears, in contrast to the strong data, keeps the global markets pressured. However, the month-end flows seem to have helped the US Treasury yields, while weighing on the US dollar. Additionally, China’s downbeat Industrial Profits data for May, 36.4% YoY versus +57.0% prior, also stops the pair buyers.
Amid these plays, S&P 500 Futures wobble around record top, up 0.05% by the press time, as traders await fresh clues.
Given the light calendar and month-end positioning, AUD/NZD traders should observer further developments relating to covid, as well as comments from the Fed policymakers, for fresh impulse.
Technical analysis
Bulls and bears jostle inside a 50-pips area between 100-day and 200-day SMAs, respectively around 1.0775 and 1.0725, with bearish bias gaining the support of late.