- NZD/USD came under some renewed selling pressure on Tuesday and dived to two-week lows.
- A co-ordinated human-right sanctioning of Chinese officials weighed on the perceived riskier kiwi.
- The upbeat US economic outlook continued underpinning the USD and added to the selling bias.
The NZD/USD pair dived to two-week lows during the Asian session, with bears now awaiting a sustained break below the 0.7100 round-figure mark.
A combination of factors failed to assist the pair to capitalize on the previous day’s modest uptick, instead prompted some fresh selling on Tuesday. Investors turned cautious after the US, Canada, UK and EU imposed sanctions on Chinese officials over human rights violations in Xinjiang. This was seen as a key factor driving some flows away from the perceived riskier kiwi.
On the other hand, the US dollar remained well supported by the prospects for a relatively faster US economic recovery from the pandemic. The optimistic economic outlook was reaffirmed by Fed Chair Jerome Powell and US Treasury Secretary Janet Yellen in their prepared remarks for delivery to the US House of Representatives Financial Services Committee on Tuesday.
Powell noted that the US recovery has progressed more quickly than generally expected and looks to be strengthening. Powell reiterated that the Fed will continue to provide the support that the economy needs for as long as it takes. Separately, Yellen said that growth and possibly full employment could return next year, thanks to the massive coronavirus stimulus package.
Meanwhile, the NZD/USD pair has now dropped to strong horizontal support, which if broken decisively will set the stage for an extension of the recent pullback from the highest level since August 2017. In the absence of any major market-moving economic releases, fresh comments by Powell and Yellen will influence the USD price dynamics and provide a fresh impetus to the major.