NZD/USD eyes 2021 bottom amid strong US Treasury yields, focus on US NFP

• NZD/USD stays range-bound after refreshing 13-day low.
• US Treasury yields refreshed nine-month high as Fedspeak backs hawkish FOMC minutes.
• Downbeat US data failed to disappoint greenback buyers, Omicron woes also weaken Antipodeans.
• Light calendar in Asia, pre-NFP mood may restrict immediate moves ahead of US session, risk catalysts are the key.

NZD/USD holds lower grounds near 0.6750 during early Friday morning in Asia, keeping the immediate range after renewing a two-week low the previous day.

The kiwi pair’s latest inaction could be linked to the typical pre-NFP cautious and a light calendar in Asia-Pacific while the Fed policymakers’ comments and the FOMC Minutes need to be thanked for the pair’s previous fall. On the same line were the fears of the South African covid variant, namely Omicron.

The recent Fedspeak backed, as well as faster rate hikes, after the Federal Open Market Committee (FOMC) Meeting Minutes, conveyed hawkish bias of the policymakers, suggesting a faster rate-hike and plans to discuss balance-sheet normalization. That said, St. Louis Fed President James Bullard pushed for a March rate hike whereas Federal Reserve Bank of San Francisco President and an FOMC member Mary C. Daly marked the need to raise interest rates to keep the economy in balance.

Elsewhere, virus conditions continue to worsen and challenge the commodities, as well as Antipodeans. While global infection figures keep refreshing record tops, NZ Herald cited 19 and 43 new community cases and infections at the borders compared to 17 and 23 respective figures marked the previous day. Chatters of return of some covid-linked activity restrictions in Australia’s most populous state New South Wales (NSW) also exert downside pressure on the NZD/USD due to the strong trading links.

Talking about the data, US Factory Orders, Weekly Jobless Claims, ISM Services PMI and Good Trade Balance all came in downbeat but couldn’t stop the US dollar bulls amid strong favor for the faster Fed rate hike, which in turn propelled the yields.

That said, the US 10-year Treasury yields refreshed a nine-month high to poke 1.75% before closing with 2.5 basis points (bps) of a daily gain near 1.728%. The same weighed on the Wall Street benchmarks even as downbeat data pushed bears to satisfy with smaller losses.

Moving on, market fears of Omicron can entertain the NZD/USD traders, mostly to the sellers, but major attention will be given to the December month jobs report from the US. Forecasts suggest the headlines Nonfarm Payroll (NFP) to rise from 210K to 400K while the Unemployment Rate may have eased to 4.1% from 4.2% prior. The underemployment rate, however, is likely rising from 7.8% to 8%. Given the upbeat expectations from the US employment data, Fed’s hawkish rhetoric is likely to be justified, which in turn could propel yields and the US dollar and may weigh on the NZD/USD prices.

Technical analysis

A clear downside break of 21-DMA and a two-week-old ascending trend line joins descending RSI line, as well as receding bullish bias of the MACD, to keep NZD/USD sellers hopeful to revisit the year 2021 bottom surrounding the 0.7000 threshold.

Alternatively, the support-turned-resistance line near 0.6775 will precede the 21-DMA level surrounding 0.6790 to limit short-term advances of the NZD/USD prices.