- NZD/USD remains pressured after posting the week’s biggest losses.
- New Zealand, China reports lesser-than-previous covid infections but Australia, Western countries suffer from Omicron.
- US inflation expectations, recent data favor Fed’s early rate hike in 2022, which adds to bears bias.
- US Pending Home Sales and Goods Trade Balance for November will decorate the calendar.
NZD/USD holds onto the previous day’s bearish bias, drops to 0.6800 during Wednesday's Asian session.
In doing so, the Kiwi pair fails to cheer the coronavirus-linked positive news at home amid broad pessimism concerning the virus. Also exerting downside pressure on the quote are the firmer expectations of the Fed’s early rate hike in 2022.
While reporting 46 new community cases of Covid-19 in New Zealand, the NZ Herald said, “Testing numbers continue to remain ‘lower than usual’ during the holiday period.” On the other hand, “China reported 197 new confirmed coronavirus cases for Dec. 28, down from 209 a day earlier, its health authority said on Wednesday,” per Reuters.
It’s worth noting that the UK reports the all-time high daily infections, above 122,000 a day after the authorities rejected any new activity restrictions during the rest of 2021. France joins the line with 179,807 new confirmed cases making it the world’s heaviest daily toll. Elsewhere, “The average number of new COVID-19 cases in the United States has risen 55% to over 205,000 per day over the last seven days,” according to a Reuters tally. Additionally, Australia’s most populous state New South Wales (NSW) reports doubling of the covid infections for Tuesday, with 11,201 new infections and three virus-led deaths.
The US inflation expectations remain near the monthly high, per 10-Year Breakeven Inflation Rate numbers from the Federal Reserve Bank of St. Louis, which in turn keeps the hope of an early rate hike from the Fed on the table and weigh on NZD/USD prices.
That said, the US reported mixed data the previous day with the US Housing Price Index eased below 1.2% forecast to 1.1% in October while S&P/Case-Shiller Home Price Indices stepped back from 19.5% prior to 18.4%, versus 18.5% market consensus. However, the Richmond Fed Manufacturing Index for December crossed the upwardly revised 12.00 figure with 16.00%.
Amid these plays, the US 10-year Treasury yields remain pressured around 1.475% while the two-year benchmark, which jumped to the highest since March 2020, also flirts with a 0.746% level. Further, S&P 500 Futures print mild gains whereas Asia-Pacific shared traded mixed at the latest.
Looking forward, the second-tier US data may entertain NZD/USD traders but risk catalysts are the key. Above all, the thin end-of-year liquidity conditions may restrict the pair’s momentum.
Technical analysis
Bull cross, firmer RSI and a successful U-turn from 23.6% Fibonacci retracement (Fibo.) of November-December declines favor NZD/USD buyers to aim for the confluence of the 200-SMA and an ascending trend line from December 09, around 0.6850.
On the flip side, the convergence of the 100-SMA and 50-SMA surrounding 0.6780-75 restricts the short-term downside of the NZD/USD prices even if the quote drops below the immediate Fibonacci support of 0.6790.