- NZD / USD bounces sharply from eight-day lows.
- USD weakens amid US stimulus hopes and risk appetite.
- The rebound in US Treasury yields could end the pair’s rally.
The pair NZD / USD moves sharply higher during the European session on Wednesday, extending the previous day’s bounce towards the 0.6625 region amid the incessant selling seen in the US dollar against its main rivals.
The USD has weakened after the US authorities moved forward on an agreement on a new fiscal stimulus package Tuesday night, increasing the odds that a deal could be reached before the Nov. 3 election. Expectations of additional stimulus in the US has boosted risk appetite sentiment and weighed negatively on the safe-haven US dollar.
Assisting the pair’s rally from the eight-day lows of 0.6553 reached on Tuesday, an improved Bank of New Zealand dairy price forecast has also helped. The central bank revised its 2020/21 forecast up from 6.5 NZD per kilogram to 6.8 NZD recently, coinciding with Fonterra’s upward revision. Keep in mind that dairy products are New Zealand’s main export product.
However, it remains to be seen whether the NZD / USD pair can sustain recovery gains above the 0.6600 level amid a rally in US Treasury yields. The rally in yields could probably make the New Zealand dollar less attractive as a higher yielding alternative asset.
Markets await the next round of talks on US fiscal stimulus to give new impetus to the pair’s price action.
NZD / USD technical perspective
Immediate resistance is at 0.6631 (50-day SMA), above which the 0.6650 psychological level could be tested. Looking down, strong support awaits at 0.6587 (100-day SMA) if the bulls fail to defend the 0.6600 level.
Credits: Forex Street

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