NZD/USD struggles to defend 0.6600 as fears from Russia, Ukraine weigh on sentiment

  • NZD/USD fades bounce off one-week low, remains pressured after three-day downtrend.
  • Anxiety over Russian invasion of Ukraine unpins safe-haven demand of gold, USD.
  • Mixed NZ data, Fedspeak also play their role to keep bears in command.
  • Geopolitical headlines, US PPI may entertain traders ahead of next week’s RBNZ.

NZD/USD buyers are unsure of their returns, mainly due to the risk-off mood, by staying defensive around 0.6615 during early Tuesday morning in Asia. Even so, the Kiwi pair pauses the previous three-day downtrend while taking rounds to the lowest levels since February 04 marked the previous day.

Global markets witnessed a shaky start of the week, portraying the risk-aversion wave, as fears of the Russian invasion of Ukraine keep fueling the safe-havens like the US dollar and gold while weighing on the Antipodeans. It’s worth noting that the US Treasury yields regained upside momentum after stepping back from a 2.5-year high on Friday whereas the Wall Street benchmark closed in the red, despite mildly positive week-start performance.

Talking about the Moscow-Kyiv story, the Western leaders initially highlighted fears of Russia’s attack on Ukraine during this week before market chatters of February 16 to be the D-day. On the positive side were headlines covering Russian Foreign Minister Sergey Lavrov who told President Putin that the US had put forward concrete proposals on reducing military risks and that he could see a way to move forward with talks. Russia’s Lavrov also mentioned that EU and NATO responses have not been satisfactory, which in turn highlights risk-off mood despite easing fears.

Elsewhere, St. Louis Fed President James Bullard reiterated his call for 100 basis points (bps) in interest rate hikes by July 1 by citing the last four inflation reports which show broadening inflationary pressures.

On the economic calendar, New Zealand’s Business NZ PSI eased in January whereas Food Price Index and REINZ House Price Index both improved during the stated month. Further, the Visitor Arrivals in December rose from 3.8% prior to 4.4% YoY.

Against this backdrop, analysts at ANZ said, “Despite slowing housing and risks to the activity outlook, the inflation impulse provides plenty of reason for the RBNZ to stay the course with OCR hikes.”

Looking forward, US Producer Price Index (PPI) for January, expected 9.1% YoY versus 9.7% prior, will join Empire State Manufacturing Index for February, market consensus 12 versus -0.7% previous readouts, to decorate the daily calendar and direct short-term NZD/USD moves. However, major attention will be given to the Fedspeak and risk catalysts.

Technical analysis

A clear downside break of a 12-day-old ascending trend line directs NZD/USD prices towards 2022 bottom surrounding 0.6530. However, February 04 low near 0.6590 may offer an intermediate halt during fall.

Alternatively, 21-DMA and the latest swing high, respectively around 0.6660 and 0.6670 in that order, will restrict corrective pullback of the Kiwi pair.

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