NZD/USD again aims for 0.6600 as trading sentiment improves

• NZD/USD struggles to defy two-day losing streak, recently eased from 0.6583.
• New Zealand Food Price Index came in better than expected.
• Odds of RBNZ rate cut in August keeps increasing amid a global rush to combat the virus.
• US-China and Canberra-Beijing tussles question the risk-on mood.

NZD/USD rises to 0.6580 amid the Asian session on Monday. In doing so, the kiwi pair defies the two-day losing streak while extending the late-Friday recoveries from 0.6546. Though, the quote seesaws near June month high after easing from the fresh high since January 27 flashed on Thursday.

Although the coronavirus (COVID-19) spread and fear of the US and Australian tension with China should ideally weigh on the quote, the NZD/USD prices seem to follow the risk-tone sentiment to portray the latest upside. While portraying the risk-on mood, S&P 500 Futures rise over 0.5% whereas the US 10-year Treasury yields keep Friday’s recovery moves around 0.63% by the press time.

Among the positives, increasing expectations of the COVID-19 cure and another round of a global monetary, as well as the fiscal, stimulus from the policymakers seem to please the market players off-late. Also, the Wall Street news that the US has a few options to punish China over the Hong Kong security law, due to the city’s status as a financial hub adds to the market’s optimism. Furthermore, the increase in New Zealand’s June month Food Price Index, from -0.8% to +0.5%, also favors the pair’s upside.

On the contrary, the surge in the global pandemic numbers beyond 13.00 million and Aussie/US warnings of arbitrary arrests of their respective citizens living in China tame the risk-on sentiment.

Considering this, Australia and New Zealand Banking Group (ANZ) said, “the RBNZ is keeping all options on the table for tools it could use, and those that would help dampen the exchange rate (or limit further appreciation) should be carefully considered.” This could weigh on the NZD/USD prices but nothing has been witnessed so far.

With no major data/events up for publishing on the calendar, the pair traders will keep taking clues from the risk-tone for fresh impetus. In doing so, the virus and China could become their keywords.

Technical analysis

A sustained break above 0.6600 becomes necessary for the bulls to attack the mid-January top near 0.6665. Alternatively, short-term sellers may seek entries below June 23 low near 0.6530.