NZD/USD down 1% to the lows for the day at 0.6944
The pressure is continuing for the kiwi on the day as there are now major concerns on how this will affect the RBNZ outlook and if tightening plans will have to be delayed/shelved.
The central bank meets tomorrow and while a rate hike may still be on the cards, any further worsening in the virus situation will cloud the outlook and what is to come and that could offer significant repercussions for the kiwi dollar.
As things stand, the kiwi has been a favourite in recent “divergence” trades but if that tailwind gets taken out, there isn’t much to work with and some unwinding is due.
For NZD/USD, price action on the daily chart has largely been more subdued since June, tugging along a range between 0.6900 and 0.7100 for the most part.
The latest downside push looks set to contest the lower end of the range, more so with the dollar now poised to gain on multiple fronts against the kiwi.
The US retail sales data today is going to be a key one to watch.
A strong report will bode will for the dollar and a weak one, while initially should see the greenback meet a setback, is still likely to see the dollar hold its ground against commodity currencies amid broader fears of risk aversion.
For now, the 0.6900 level and July low @ 0.6881 will be the key levels to watch for any further downside pressure in the kiwi. A break below that will open up a slippery slope with further support only seen next closer to 0.6700 – the 61.8 retracement level of the swing move higher from March last year to February this year.