NZD/USD erases some of its earlier gains, remaining positive around 0.6310s

• NZD/USD edges up 0.50% during Wednesday’s session amidst risk-aversion.
• Sentiment shifted on the rise of China’s Covid-19 cases.
• NZD/USD Price Analysis: Downward biased once it clears 0.6300, and the 20-day EMA, it could aim towards 0.6180s.

The New Zealand Dollar (NZD) clings to some of its earlier gains after hitting a weekly high of 0.6355 and sliding toward the 0.6300 regions, though it remains positive in the day, gaining 0.50%. Factors such as China’s relaxing Covid-19 restrictions, and the rise of cases, in the second-largest economy sounded the alarms worldwide. Therefore, the NZD/USD is trading at 0.6309.

Wall Street finished Wednesday’s session in the red. The jump in Covid-19 cases in China triggered restrictions on flights originating from China, with Italy beginning to test arrivals after two flights to Milan were found to have the virus, according to Bloomberg. Later, the US said that it would require all air passengers to get a Covid-19 test no more than two days before departure.

Data-wise, the US economic docket revealed that Pending Home Sales for November dropped 4% MoM vs. expectations for a 4.6% contraction, which was better than estimated. However, according to the National Association of Realtors, it fell to its lowest level outside the pandemic in data back to 2001. On an annual basis, Pending Sales plunged to 37.8% YoY, below a 37% fall.

In the meantime, the Richmond Fed Manufacturing Index improved to 1, exceeding the previous month’s contraction to -9.

Aside from this, higher US Treasury yields lifted the battered US Dollar (USD), which has tumbled some 9% after peaking at 114.778. The US 10-year Treasury bond yield rises four bps, at 3.885%, while the US Dollar Index (DXY) recovers some ground, up 0.25%, at 104.530.

In the week ahead, the US economic docket will feature Initial Jobless Claims for the week ending on December 23, while an absent New Zealand economic calendar will leave the NZD/USD pair adrift to US Dollar dynamics.

NZD/USD Price Analysis: Technical outlook

From a daily chart perspective, the NZD/USD has been trending up during the week until today, when it could not crack the 0.6355 daily high and retreated toward the 0.6300-0.6310 area. Also, the Relative Strength Index (RSI) shows buyers are losing momentum, while the 20-day Exponential Moving Average (EMA) at 0.6299 keeps the major from dropping. Even though the NZD/USD clings to its gains, the Rate of Change (RoC) signals sellers could be positioning for further downside action. Therefore, the NZD/USD first support would be the 0.6300 figure, followed by the 20-day EMA and the 200-day EMA at 0.6255. Once cleared, the next support would be the 50-day EMA at 0.6187.