NZD/USD grinds lower past 0.6800 amid mixed concerns, holiday mood

• NZD/USD fades bounce off intraday lows during a sluggish Asian session.
• China reports downbeat Industrial Profits, Omicron woes escalate.
• US T-bond yields weigh on DXY, US retail sales jump in holiday season.
• Holidays in New Zealand, UK, Canada and Australia restrict market moves.

NZD/USD struggles to defend the 0.6800 threshold, sluggish near 0.6820 during early Monday. In addition to the Boxing Day holiday in New Zealand, mixed updates over Omicron and geopolitics also challenge the Kiwi pair traders during the final days of 2021.

Among the negatives were fears of the covid infections and inflation. On the contrary, the positives include hopes of US stimulus and firmer US retail sales, not to forget global studies showing lesser odds of hospitalization due to the South African COVID-19 variant, namely Omicron.

China reported 206 new COVID-19 cases for December 25 versus 140 the previous day while New Zealand reported 34 cases for the day. Further, Australia’s most populous state New South Wales (NSW) unfortunately reported a new high in coronavirus infections, to 6,394, while ABC news cites a 36% fall in tests. Elsewhere, the average number of new US coronavirus cases has risen 45% to 179,000 per day over the past week, per Reuters tally whereas the UK and France reported a fresh high of Covid-19 daily infections, respectively crossing 122,000 and 94,000 daily cases at the latest.

In addition to the jump in cases, which led to cancellations of over 4,500 flights during the Christmas weekend, escalating tensions between Russia and Ukraine also weigh on the sentiment. Furthermore, US Vice President Kamala Harris’ comments citing inflation fears also weigh on the sentiment, as well as the NZD/USD prices.

On the contrary, US VP Harris sounds optimistic about getting President Joe Biden’s Build Back Better (BBB) plan despite the latest challenges raised by Senator Joe Manchin. On the same line were the receding fears of Omicron, mainly due to positive developments concerning the virus cure and studies showing less hospitalization due to the South African COVID-19 variant, also keep the NZD/USD buyers hopeful.

Against this backdrop, the US 10-year Treasury yields remain pressured around 1.48% whereas the S&P 500 Futures print mild gains at the latest.

It’s worth noting that downbeat prints of China’s Industrial Profit for November, 38.2% YTD and 9.0% YoY versus 42.2% and 24.60% respectively, exert additional downside pressure on the NZD/USD prices.

Moving on, the US Dallas Fed Manufacturing Index for December, expected 13.2 versus 11.8 prior, may offer intermediate moves to the NZD/USD prices, in addition to the risk catalysts, during a likely sluggish session.

Technical analysis

Despite the latest pullback, NZD/USD pair’s successful run-up beyond 20-DMA, backed by bullish MACD and steady RSI, favors the Kiwi pair buyers. However, a daily close beyond a three-month-old horizontal area, near 0.6855-60, puts a cap on the short-term advances.

Should the NZD/USD bulls manage to cross the stated key hurdle, 100-DMA and early October swing high near 0.6990 will be in the spotlight. On the contrary, a downside break of the 20-DMA, around 0.6785, won’t hesitate to challenge the yearly low of 0.6701.