NZD/USD co-chairs G10 losers below 0.6800 as coronavirus woes fuel yields ahead of US ISM PMI

• NZD/USD takes offers to refresh intraday low, down for the second consecutive day.
• Fed Minutes, ADP Employment Change previously propelled bond coupons on rate hike expectations.
• Upbeat China PMI fails to recall bulls as covid woes escalate.
• US ISM Services PMI may entertain traders ahead of Friday’s US NFP.

NZD/USD bears attack weekly bottom surrounding 0.6770, down 0.34% intraday to join AUD/USD while posting the biggest daily losses among the Group of Ten (G10) currency pairs.

In doing so, the Kiwi pair tracks firmer US Treasury bond yields to extend the previous day’s losses. That said, the worsening coronavirus conditions add to the market’s previous favor to the US bond bears, which in turn directs the traders off from commodities and linked currencies like the Aussie and Kiwi.

The US 10-year Treasury yields jumped to the highest level since April 2021 by the end of Wednesday’s North American session, up 3.4 basis points (bps) to 1.70%, which in turn drowned the Wall Street benchmark. Recently, the US 10-year bond yields refresh a nine-month high of around 1.71%, which in turn weighed on the S&P 500 Futures.

“The number of people linked to an Auckland brothel who are infected with Covid-19 is continuing to grow,” said NZ Herald while citing 17 new covid cases and 23 cases at the border at the latest. Not only at home but the COVID-19 infections also keep rising elsewhere and strain the medical systems even as policymakers reject calls of witnessing early 2021-like pandemic days.

Read: Covid update: Spreading like wildfire, but ''horrific scenes'' seen a year ago could be history

While tracking the virus woes, the NZD/USD prices ignored upbeat prints of China’s private activity gauge. China’s Caixin Services PMI rose past 52.1 figures flashed in November to 53.3 for December.

Fed policymakers discussed faster rate-hike and plans for balance-sheet normalization during the latest FOMC, signaled by the Minutes. Given the strong US ADP Employment Change for December, 804K versus 400K expected, statements from the Fed Minutes like, “conditions for a rate hike could be met relatively soon if the recent pace of labor market improvements continues” also propelled the US bond coupons.

As a result, the Fed interest rate futures pointed at the 80% chance of a hike in March 2022 after the Fed minutes.

It’s worth noting that Evergrande and geopolitics are an extra burden on the NZD/USD prices, not to forget the market’s cautious sentiment ahead of Friday’s US Nonfarm Payrolls (NFP).

Read: US December Nonfarm Payrolls Preview: Analyzing gold's reaction to NFP surprises

Technical analysis

NZD/USD stays inside a short-term trading range between 0.6860 and 0.6770.  Given the quote’s pullback from 0.6838, on Wednesday, NZD/USD bears are likely to retest the 0.6860. The hopes of the pair’s further downside, also keeping the stated range, take clues from steady RSI and recently sluggish MACD.

On the contrary, 0.6740 may test the NZD/USD bears past 0.6770 before offering them the year 2021 low near 0.6701.