NZD/USD begins 2022 on a back foot below 0.6860 hurdle amid coronavirus fears

• NZD/USD pauses three-day uptrend, gaps down to kick-start 2022 trading.
• Omicron, Fed rate-hike could keep bears hopeful despite late 2021 consolidation.
• New Zealand reaches 90% vaccination targets but virus infections create the problem.
• Off in Australia, New Zealand restrict market moves, US PMIs for December eyed for today, US NFP is the key.

NZD/USD seesaws around the short-term key resistance, following a year-start gap down to 0.6832, during the early Monday morning in Asia. That said, Holidays in major Asia-Pacific markets offer a dull start to 2022, which in turn clutches the kiwi pair around 0.6830-35 despite snapping a three-day uptrend amid the coronavirus woes.

New Zealand managed to meet, actually surpass their 90% double jabbing target with 92.1% population being double vaccinated for the coronavirus. Even so, the coronavirus cases keep rising with the latest count of 105 new cases and 53 deaths per NZ Herald.

On the other hand, 14-day average cases in the US jumped 200% by January 01, to near 386,000, whereas death toll eased 4% to 1,240 new virus-linked loss of life, as per figures from New York Times (NYT).

While identifying this, "When you have so many, many cases, even if the rate of hospitalization is lower with Omicron than it is with Delta, there's still the danger that you're going to have a surging of hospitalizations that might stress the health care system," said Anthony Fauci, Director of the National Institute of Allergy and Infectious Diseases per CNN.

It’s worth noting that the Kiwi pair rose 0.35% during December and over 5.0% in the year 2021 as the hawkish Fed superseded the Reserve Bank of New Zealand’s (RBNZ) rate hike. Adding to the bearish bias for the NZD/USD was the worsening of the COVID-19 conditions and the Sino-American tussles, not to forget the financial market crisis in China.

Looking forward, the covid variant linked to South Africa, dubbed as Omicron, becomes a major short-term challenge to the market sentiment and NZD/USD prices even as optimistic studies keep policymakers hopeful. Also important are the recently firmer US inflation expectations, as per 10-Year Breakeven Inflation Rate numbers from the Federal Reserve Bank of St. Louis (FRED) that jumped to the highest levels since November 24 at the latest and fuel hopes of a faster Fed rate hike in 2022.

For the day, the final reading of US PMIs will be important to watch for near-term direction while the US jobs report for December 2021, up for publishing on Friday will be crucial.

Technical analysis

Successful trading above 21-DMA joins the bullish MACD signals and firmer RSI line to keep NZD/USD buyers hopeful. However, a clear upside break of a three-month-old horizontal area near 0.6860 becomes necessary for the kiwi pair’s further upside.

Meanwhile, pullback moves may aim for the 21-DMA retest, around 0.6790 by the press time.