NZDUSD has been a bit in the background in recent trade, dropping back from close to session highs in the upper 0.7230s to current levels around 0.7220 and remaining well supported above 0.7200. The pair closed on Thursday, with decent gains amid a broadly softer US dollar, rising 0.6% or 46 pips.
The US dollar weakened mainly against its more risk sensitive G10 peers on Thursday in the run-up to comments from the Chairman of the Federal Reserve Jerome Powell, who largely fixed to the usual dovish script on Fed policy and on the topic of asset purchase program tapering, pushed back against the notion that this is going to happen, or indeed should be talked about, soon.
Moderate weekly jobless claims data out of the US might have also added to weakness in the currency; in the week ending on the 9 January, 965K American signed up for unemployment insurance, a substantial spike from the week prior’s 784K reading and well above expectations for 795K. The numbers show that after a rough December for the US labor market (as indicated in last week’s official NFP report), weakness has spilled over to January, which is unsurprising given the rate at which Covid-19 is spreading in the country is yet to relent and many industries (namely hospitality and leisure) are still locked down.
Traders will await to hear from incoming US President Joe Biden on the fiscal stimulus plan he will push for once he gets into office, though many details have now been released.
Technically, the pair broke above key trendline resistance on Thursday; the pair broke above a downtrend linking the 6, 8 and 13 January highs to rally back to match the previous weekly high at 0.7240. The pair has now retraced for a retest of this downtrend and it is holding up as support for now.
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