NZD/USD hits wall of resistance near 0.6860 on sluggish yields, Fedspeak eyed

• NZD/USD seesaws around two-week high as 50-DMA, multi-day-old horizontal hurdle challenge bulls.
• Market sentiment dwindles after surprising reaction to US inflation.
• New Zealand Building Permits improved to +0.6% in November, monthly Filled Jobs rose too.
• Fed policymakers support faster rate hikes starting from March during the final days before blackout period.

Having jumped the most in more than three months, NZD/USD battles a strong resistance of around 0.6860 during Thursday’s Asian session.

The kiwi pair seesaws around the fortnight high, flashed the previous day, as market players recheck bullish bias following the recently hawkish Fedspeak.

It’s worth noting that the quote’s rally on Wednesday ignored a 40-year high US inflation as markets turned risk-on following the US Consumer Price Index (CPI) release. US CPI jumped to the highest levels since 1982 while matching 7.0% YoY forecasts, up from 6.8% previous readouts. The monthly figures rose to 0.5% versus 0.4% expected but softened below 0.8% prior.

At home, New Zealand’s Building Permits for November rose to +0.6% versus -2.0% revised prior. On Wednesday, the country reported upbeat second-tier jobs data and favored the NZD/USD during early hours despite downbeat China inflation figures for December.

Following the NZ jobs data, the ANZ report said, “Monthly filled jobs data released by Stats NZ yesterday showed jobs growth accelerated to 0.4% m/m (4.3% y/y) in November (0.2% m/m previously). Kiwi firms have now posted 10 months in a row of jobs gains, despite spending the last four of those months (August to November) battling the latest Delta outbreak.”

It should be observed that the recent Fedspeak has been too hawkish, suggesting rate hikes and raising concerns over the higher inflation, which in turn probes the NZD/USD buyers. On the same line are the covid woes as Australia becomes vulnerable with a fresh record high of daily COVID-19 infections and virus cases at home also keep running higher.

Amid these plays, US Treasury yields remain sluggish, mainly the 10-year bond, while the S&P 500 Futures fail to track the Wall Street gains.

Moving on, a snap national cabinet meeting in Australia to battle the virus can affect NZD/USD prices due to New Zealand’s trade links with Canberra. However, major attention will be given to the Fedspeak and US jobless claims as Fed policymakers will sneak into the blackout period for speeches by the end of this week.

To sum up, virus woes and inflation fears join the hawkish Fed to challenge the NZD/USD buyers. However, markets seem to wait for strong catalysts as most of the recent news march the previous forecasts and have already been priced.

Technical analysis

A clear upside break of the two-month-old descending trend line, around 0.6800 by the press time, joins bullish MACD and firmer RSI to favor NZD/USD to battle a horizontal area comprising multiple levels marked since late September and 50-DMA around 0.6860.

While the 0.6900 threshold and 100-DMA level surrounding 0.6960 lures NZD/USD bulls, pullback moves remain less important until staying beyond the resistance-turned-support from November, near 0.6800.