- NZD/USD witnessed some heavy selling on Tuesday amid resurgent USD demand.
- COVID-19 woes weighed on investors’ sentiment and benefitted the safe-haven USD.
- Tumbling US bond yields might act as a headwind for the buck and help limit losses.
The NZD/USD pair added to its intraday losses and dropped to fresh daily lows, around the 0.6945 region during the early European session.
Following a brief consolidation through the first half of the trading action on Tuesday, the NZD/USD pair witnessed some heavy selling and erased its modest gains recorded over the past two sessions. The intraday slide was exclusively sponsored by a sudden pickup in the US dollar demand amid a fresh bout of the risk-aversion trade.
Investors remain worried that the spread of the highly contagious Delta variant of the coronavirus could derail the global economic recovery. This, in turn, took its toll on the global risk sentiment, which was evident from a sharp fall in the equity markets and provided a goodish lift to the traditional safe-haven greenback.
Meanwhile, the risk-off impulse in the markets triggered a fresh leg down in the US Treasury bond yields. This might act as a headwind for the USD and hold traders from placing any aggressive bearish bets around the NZD/USD pair. Hence, it will be prudent to wait for some follow-through selling before positioning for any further decline.
Market participants now look forward to the US economic docket, highlighting the releases of Durable Goods Orders and the Conference Board's Consumer Confidence Index. This, along with the broader market risk sentiment, will influence the USD price dynamics and provide some short-term trading impetus to the perceived riskier kiwi.