NZD/USD dives to three-week lows, approaching 0.6900 mark
- A combination of factors prompted dragged NZD/USD lower for the second consecutive day.
- The risk-off impulse benefitted the safe-haven USD and undermined the perceived riskier kiwi.
- NZ PM Ardern announced a snap three-day nationwide lockdown and added to the selling bias.
The NZD/USD pair maintained its heavily offered tone heading into the European session and dropped to near three-week lows, around the 0.6915 region in the last hour.
The pair extended the previous day's retracement slide from the 0.7050 supply zone and witnessed heavy selling during the first half of the trading action on Tuesday. This marked the second day of a negative move and was sponsored by worries about the fast-spreading Delta variant of the coronavirus.
The market concerns about the economic fallout from the continuous rise in new COVID-19 cases were further fueled by disappointing Chinese macro data on Monday. This, along with political tension in Afghanistan, took its toll on the global risk sentiment and benefitted the safe-haven US dollar.
The perceived riskier kiwi was further pressured after New Zealand Prime Minister Jacinda Ardern announced a snap three-day nationwide lockdown in light of the community case detected in Auckland. This was seen as another factor that contributed to the sharp intraday decline for the NZD/USD pair.
The downward momentum took along some trading stops near the 0.6975-70 horizontal support and aggravated the bearish pressure surrounding the NZD/USD pair. This might have already set the stage for a further depreciating move as the focus now shifts to the RBNZ policy decision on Wednesday.
In the meantime, traders will take cues from Tuesday's release of US monthly Retail Sales figures and Fed Chair Jerome Powell's speech later during the US session. Apart from this, the FOMC meeting minutes on Wednesday will help determine the next leg of a directional move for the NZD/USD pair.
Technical levels to watch