NZD/USD falls back towards sub-0.6450 weekly lows, 21DMA offering support for now

• NZD/USD has fallen back towards sub-0.6450 weekly lows, where the 21DMA is now offering support.
• The pair is eyeing a possible break towards 0.6300 should risk appetite continue to deteriorate/US yields keep pushing higher.
• Friday’s US CPI data is the main event of the week for the pair.

The New Zealand dollar, whilst not the worst performer on the day (the yen once again takes that crown as it gets battered by the BoJ’s persistently dovish stance), is once again one of the G10’s worst-performing currencies. A rise in US government bond yields, with the 10-year last trading around 6 bps higher above the 3.0% level and near multi-week highs, are boosting the buck across the board.

Meanwhile, though still well within this week’s ranges, US equity index futures are trading on the back foot ahead of the open, putting a dampener on risk appetite in the currency space. NZD is considered one of the more risk-sensitive G10 currencies alongside the likes of AUD and NOK.

As a result, NZD/USD is trading back to the south of the 0.6450 level and eyeing a test of weekly lows in the 0.6420s. For now, the pair’s 21-Day Moving Average closer to 0.6430 is providing support. But a break below here and the 0.6400 level if risk appetite continues to worsen could see the pair quickly fall to the next area of support around 0.6300.

In terms of macro events to watch on Wednesday; a 10-year US bond auction could hurt NZD/USD if it triggered further US yield upside. Otherwise, the calendar is looking pretty quiet. The main event of the week is this Friday’s US Consumer Price Inflation (CPI) report, which will be looked at in the context of how it impacts the outlook for Fed policy.