- The NZD / USD has dipped below 0.7100 in recent trading, amid a rally in the dollar.
- The USD moves slowly towards the end of the year, where the rebalancing of flows could provide some support.
He NZD / USD it has dipped below the 0.7100 level in the recent trade and is down about half a percent on the day or just under 40 pips. The pair is being driven largely by USD flows amid the lack of a notable news flow coming from Australia. The US dollar has been rebounding in recent trade against most of its major counterparts aside from the euro, thus lower on the kiwi, despite the rise in risk assets elsewhere.
In the grand scheme of things, the NZD / USD continues to trade well within the recent ranges of 0.7000-0.7160. On the downside, NZD / USD bears should watch out for the 21-day moving average at 0.70714. Beyond that, the next key support will be before the 0.7000 psychological level, which has proven to be a solid bottom for price action so far this month.
The USD moves higher at the end of the year
Some analysts might argue that the news that US President Donald Trump has changed course and opted to sign the $ 900 B Covid-19 aid bill from Congress is helping the USD, based on the traditional argument that can be done for any currency; more fiscal stimulus = better economic performance = stronger currency. This argument may have some merit, but in the recent past and due to the USD’s status as a safe haven, it has not had much influence. In other words, the safe-haven properties of the USD have caused it to sell amid any stimulus-induced risk over conditions.
A simpler argument could be that at the end of a grueling year for the dollar, the USD could be experiencing soft demand as major institutions undertake a month, quarter, and year-end rebalancing. In fact, the dollar index (DXY) strengthened, which could be a sign of things to come this week.
With Brexit now “settled” (the two sides managed to scrape a basic deal that at least eliminates the risk of no trading, anyway) and the GBP selling out afterward, and the US stimulus now settled as well, things are likely to turn around. calm down for the rest of the year. In any case, the focus will be on the pandemic and the progress of mass vaccination programs.
In the year, DXY has gone down roughly 6.7% so perhaps some short profit taking is warranted now that the key risk events listed above have been overcome and it could hold DXY support above 90.00 for the remainder of the year.
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