NZD/USD struggles to extend corrective pullback below 0.6800 on mixed clues

• NZD/USD begins the trading week with no surprises, seesaws near Friday’s close.
• Virus woes, geopolitical fears probe bulls despite Friday’s USD weakness, US stimulus hopes.
• US job numbers came in mixed but NFP disappointment drowned the greenback.
• No major data at home for the day, inflation figures from China and US will be crucial for the week.

NZD/USD remains steady, mostly pressured around 0.6780, during the early Monday morning in Asia.

The Kiwi pair bounced off the 13-day low on Friday after the US jobs report for December triggered the US dollar weakness. However, the virus-linked challenges at home and abroad keep the Antipodeans on the backfoot. Adding to the bearish bias are the latest geopolitical fears concerning the US-China and Ukraine-Russia tussles.

Talking about US employment details for December, the headline Nonfarm Payrolls (NFP) disappointed markets with 199K figures for December versus 400K forecasts and 249K prior (upwardly revised from 210K). However, the Unemployment Rate dropped to 3.9% compared to 4.1% market consensus and 4.2% in November while the U6 Underemployment Rate that fell to 7.3% against November's downwardly revised 7.7%, both closing in the pre-pandemic levels. That said, an NFP-led disappointment was largely overruled by the Unemployment Rate and U6 Underemployment Rate.

Following the data, the US dollar portrayed the biggest daily loss in six weeks but the equities and yields couldn’t ignore market bets for the Fed rate hikes in March, recently around 80%.

It should be observed that the faster spread of the South African covid variant, namely Omicron, joins the discovery of a new virus strain, called IHU, to add to the market fears.

“New Zealand has so far managed to dodge a mass Omicron outbreak in the community, but there are serious fears of that happening as the highly transmissible variant has started to become the dominant one at the border. The Ministry of Health yesterday announced 85 community cases of Covid-19 over the previous two days and 64 cases found at the border during the same period,” said NZ Herald.

Also challenging the NZD/USD bulls is the US-China tussles continue, recently over trade and the human rights issues while Russia-Ukraine matter gains major attention ahead of this week’s Washington-Moscow meeting.

Alternatively, the US dollar’s failures to gain a pickup and hopes of overcoming the current round of virus spread with fewer problems than the previous rounds, backed by scientific studies, join firmer expectations of further stimulus from the US and China to test NZD/USD bears.

Moving on, a light calendar at home may keep the risk catalysts in the driver’s seat, suggesting further downside of the kiwi pair. However, inflation data from the US and China will be crucial to watch for the weekly guide.

Read: US Payrolls Disappoint for the Second Month: Economy seems strong despite Omicron

Technical analysis

Although a one-month-old horizontal area surrounding 0.6730-35 triggered the NZD/USD pair’s bounce on Friday, a clear upside break of the 21-DMA level of 0.6790 becomes necessary for the buyer’s return.

On the contrary, fresh selling pressure will eyes for 0.6730 before directing the NZD/USD bears towards the year 2021 bottom surrounding 0.6700.