Forex Market: NZD/USD falls from one-month highs as virus spread, Fed comments undermine risk sentiment

NZD/USD extended losses from the previous trading day on Wednesday, as COVID-19 resurgence in the United States and renewed lockdowns in some countries heightened the safe haven appeal of the US Dollar.

Yesterday the number of confirmed cases of the illness in the United States were reported to have surpassed 3 million, which pushed US Treasury yields lower.

Investor risk sentiment also took a hit after three Fed officials warned that surging new coronavirus infections could jeopardize consumer spending and job gains just as some stimulus programmes are set to expire.

“The mood changes day by day, but the dollar looks to be supported for now as investors turn more cautious about the virus,” Yukio Ishizuki, foreign exchange strategist at Daiwa Securities, said.

“The Fed’s comments on the economy sound sombre. There’s reason to worry because it is hard to see when the virus will be brought under control.”

As of 6:49 GMT on Wednesday NZD/USD was edging down 0.10% to trade at 0.6540, after touching an intraday high of 0.6562 during early Asian session, or a level not far from Tuesday’s one-month high. The major pair has trimmed gains for the current week, now being up 0.12%, after gaining 1.72% last week – its best performance since the business week ended on June 5th.

No relevant macroeconomic reports or other events that may affect NZD/USD are scheduled for Wednesday. Trading in the pair will probably be driven by sentiment entirely.

Bond Yield Spread

The spread between 1-year New Zealand and 1-year US bond yields, which reflects the flow of funds in a short term, equaled 9.2 basis points (0.092%) as of 6:15 GMT on Wednesday, or unchanged compared to July 7th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 0.6549
R1 – 0.6578
R2 – 0.6610
R3 – 0.6639
R4 – 0.6669

S1 – 0.6517
S2 – 0.6488
S3 – 0.6457
S4 – 0.6425