NZD/USD jumps back towards 0.7000 on RBNZ Governor Orr’s cautious optimism

• NZD/USD reverses the RBNZ-led losses on the Governor Adrian Orr’s comments.
• RBNZ’s Orr said clear reduction is to be lifting the cash rate
• S&P 500 Futures, US Treasury yields improve despite escalating covid woes.
• FOMC Minutes, risk catalysts will offer a busy day ahead.

NZD/USD picks up bids to 0.6940, up 0.27% intraday, as Reserve Bank of New Zealand (RBNZ) Governor Orr keeps the rate hike concerns on the table during the latest speech on early Wednesday.

While portraying a cautious optimism, RBNZ’s Orr said, “Lockdown is a concern, but less concerned than would have been last year.”

Read: RBNZ’s Orr: Keeping rates at 0.25% “for now”

Earlier in the day, RBNZ surprised markets while keeping the benchmark interest rates unchanged, versus a widely expected 0.25% rate hike, amid concerns over the latest coronavirus outbreak in New Zealand (NZ). Even so, the RBNZ Minutes said, “Committee agreed that their least regrets policy stance is to further reduce monetary policy stimulus.”

Read: RBNZ Minutes: OCR left unchanged in light of the current level 4 lockdown and health uncertainty

The pair’s post-RBNZ rebound could also be linked to the US dollar’s weakness ahead of the Federal Open Market Committee (FOMC) Minutes. That said, the US Dollar Index (DXY) drops to 93.06, down 0.08% intraday to snap a two-day uptrend and easy from the weekly top by the press time.

The DXY pullback could be traced to the market’s indecision over the Fed’s next moves as the latest Fedspeak has been mixed. On Tuesday, Minneapolis Fed President Neel Kashkari’s repeat of tapering comments battles Fed Chairman Jerome Powell’s cautious optimism after the US Retail Sales for July dropped below -0.3% expected and +0.7% previous to -1.1% MoM.

Even so, the greenback buyers remain hopeful as the virus conditions recently worsen in New Zealand and Australia. As per the latest updates, NZ reports seven new covid cases versus the first marked from Auckland the previous day whereas Australia’s New South Wales report all-time high covid cases, propelling the national count to the fresh top since August 2020. Elsewhere, China’s cases eased but the fears that the US weekly infections will jump to 200,000 and the UK’s highest virus-led death toll since March weigh keep highlighting Delta covid variant woes.

Other than the COVID-19 jitters, geopolitical concerning Afghanistan and stimulus deadlock in the US also weigh on the risk appetite, underpinning the USD’s safe-haven demand.

Even so, the US 10-year Treasury yields added one basis point to 1.268% whereas S&P 500 Futures reverse the early Asian losses by the press time.

Given the risk-off-driven strength of the US dollar, NZD/USD bears are likely to remain in the driver’s seat. However, qualitative catalysts will decide the short-term moves, not to forget the FOMC Minutes.

Technical analysis

NZD/USD remains indecisive unless staying between 20-DMA level near 0.7000 and with the 61.8% Fibonacci retracement of August 2020 to February 2021 upside around 0.6860. However, risk-off mood and the RBNZ’s negative surprise, not to forget bearish MACD, keeps the pair sellers hopeful.