- NZD/USD drifted into the negative territory for the third consecutive session on Tuesday.
- A modest pickup in the USD demand exerted pressure amid the prevalent caution mood.
The NZD/USD pair added to its intraday losses and dropped to four-day lows, around the 0.7015-10 region during the early part of the European session.
The pair struggled to capitalize on its modest uptick, instead met with some fresh supply near mid-0.7000s and extended its recent pullback from the vicinity of the 0.7100 mark. This marked the third consecutive day of a negative move and was sponsored by a modest US dollar strength.
The USD was supported by growing marked speculations that the Fed will tighten its monetary policy earlier if price pressures continue to intensify. This, along with a goodish pickup in the US Treasury bond yields, acted as a tailwind for the greenback and exerted pressure on the NZD/USD pair.
Apart from this, the prevalent cautious mood – amid concerns over the spread of the highly infectious delta variant of the COVID-19 virus – further underpinned the safe-haven USD. This, in turn, was seen as another factor that drove flows away from the perceived riskier kiwi.
With the latest leg down, the NZD/USD pair has eroded a part of the last week's strong gains. A subsequent break below the key 0.7000 psychological mark will again shift the near-term bias back in favour of bearish traders and prompt some aggressive technical selling.
That said, investors might refrain from placing any aggressive bets ahead of Friday's release of the closely watched US jobs data. The popularly known NFP report will influence the USD price dynamics in the near term and provide a fresh directional impetus to the NZD/USD pair.
In the meantime, traders are likely to take cues from Tuesday's release of the Conference Board's US Consumer Confidence Index. This, along with the US bond yields and the market risk sentiment, will drive the USD and produce some trading opportunities around the NZD/USD pair.