NZD/USD pauses four-day uptrend towards 0.7100 on coronavirus fears

• NZD/USD bulls take a breather around monthly high as bulls attack a resistance line from early July.
• NZ PM Ardern struggles to tame the fears of another spike in covid figures, WHO observe virus variant.
• New Zealand Terms of Trade Index rose past market consensus and forecast in Q2.
• Covid updates, second-tier US job-related data will be important to watch.

NZD/USD consolidates recent gains around monthly high, down 0.05% intraday near 0.7065 during Thursday’s Asian session. In doing so, the kiwi pair pays a little heed to the domestic data and broad US dollar weakness as the COVID-19 fears renew.

New Zealand’s Terms of Trade Index for the second quarter (Q2) jumps to a fresh high since the quarter ended on May 2017 while rising 3.3% versus 2.5% expected and 0.1% prior.

The figures increase the odds of the Reserve Bank of New Zealand’s (RBNZ) rate hike in 2021 and should have favored the NZD/USD prices to extend the previous four-day rise. However, the virus-led challenges at home probe the bulls.

After snapping the earlier downtrend in the coronavirus numbers, market players fear another blockbuster figure pushing the national count above 700. Even so, New Zealand Prime Minister Jacinda Ardern is playing down fears that New Zealand could follow New South Wales and Victoria in being unable to eliminate Covid-19, per NZ Herald. On the same line, the World Health Organization (WHO) observes another strain of the virus, namely Mu, which has vaccine resistance and poses serious challenges.

It’s worth noting that downbeat signals of US employment report tamed the Fed’s tapering chatters the previous day and fueled the NZD/USD prices. That said, the ADP Employment Change for August rose 374K versus expectations of a 613K rise. Also challenging the jobs scenario was the employment component of the ISM Manufacturing PMI that slumped to the contraction region with the 49.0 figures against 52.9 prior.

Amid these plays, the Wall Street benchmarks managed to recover initial losses, closing mixed, whereas the US 10-year Treasury yields eased 0.3 basis points (bps) to 1.299% by the end of Wednesday’s North American session. However, the S&P 500 Futures seek fresh directions around the record top by the press time.

Looking forward, a light calendar in Asia, except for Aussie trade numbers, pushes the NZD/USD traders to wait for second-tier US employment data like Nonfarm Productivity for Q2 and weekly jobless claims for fresh impulse. Meanwhile, virus woes challenge the bulls and so do the cautious sentiment ahead of Friday’s US Nonfarm Payrolls (NFP).

Technical analysis

NZD/USD remains on the front-foot as an eight-day-old rising trend line, around 0.7040, joins bullish MACD. However, a clear break of a downward sloping trend line from July 06 and 100-DMA, respectively near 0.7075 and 0.7085, becomes necessary for the bulls to keep reins.