NZD/USD edges lower around 0.6950 on Fed tapering concerns

• NZD/USD remains pressured after snapping three-day uptrend the previous day.
• Fed policymakers back tapering ahead of Chairman Powell’s key speech at Jackson Hole Symposium.
• Geopolitical catalysts, virus woes also contribute to recently bearish impulse.
• No major data at home but risk catalysts and Powell’s showdown will be crucial to follow.

NZD/USD consolidates the weekly gains, following the first daily negative, around 0.6950 during early Friday morning in Asia. In doing so, the Kiwi pair portrays the market’s cautious mood ahead of the key appearance of Fed Chairman Jerome Powell at the Kansas City Fed’s annual (virtual) Jackson Hole symposium.

Underpinning the fears are the latest comments from the Fed officials who back monetary policy adjustments, ignoring the latest economic challenges raised by the Delta covid variant. Topping all is Dallas Fed President Robert Kaplan who said, “Fed's asset purchases had their purpose and their time but not longer well-suited to the situation.” James Bullard and Ester George were the rest of the non-voting Fed members who followed Kaplan and firmed up concerns over tapering.

Other than the anxiety over Powell’s powerplay, the coronavirus jitters also weighed down the NZD/USD prices. Not only in New Zealand, where the figures jumped by 68 to 277, but record infections in Australia and multi-day high death levels in the West also weigh on the risk appetite. It’s worth noting that the chatters over six-month immunity of vaccines and the need for a third jab also add to the risk-off mood.

Geopolitical challenges from Afghanistan and China played their part to roil the mood and heavy the NZD/USD after three days of run-up. While blast at Kabul airport and reports of two or three US officials being hurt raised worries of the US response to Taliban. Elsewhere, the likely meeting between the US and Chinese equity officials joins Beijing’s dislike for American pressure and meddling into the internal matters to highlight the geopolitical fears.

Talking about the data, the second version of the US Q2 Gross Domestic Product (GDP) got upward revision to 6.6% QoQ versus 6.5% prior, missing the expected 6.7% whereas Core PCE figures in the same quarter were confirmed the prior market consensus of 6.1%. Further, weekly jobless claims also inched up but held lower ground.

Amid these plays, the US 10-year Treasury yields remained indecisive around 1.34% but Wall Street snapped a five-day uptrend. Further, the US Dollar Index (DXY) rose the most in a week after four days of a downside, exerting downside pressure on the commodities and Antipodeans.

Looking forward, pre-Jackson Hole caution may keep grinding the NZD/USD prices to the south, joined by the covid woes and challenges to the market sentiment. However, bulls may regain control if Fed’s Powell chose to reject the tapering push.

Technical analysis

A U-turn from 21 and 50 DMAs back NZD/USD sellers to aim for July’s low surrounding 0.6880. Meanwhile, the 0.7000 threshold adds to the upside filters.