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New Zealand Dollar May Fall Further as Stimulus-Driven Yield Climb Continues

New Zealand Dollar May Fall Further as Stimulus-Driven Yield Climb Continues

Thomas Westwater, Analyst

NZD/USD, US Stimulus, Treasury Yields, Covid -Talking Points

  • Nasdaq enters correction as tech stocks suffer from rotation trade
  • Treasury yield climb continues as $1.9 trillion stimulus bill eyes final vote
  • NZD/USD breaks below technical level, more losses in store for the Kiwi?
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US tech stocks sold off today as Treasury yields rose across the curve forcing investors to reallocate into more defensive stocks. The tech-heavy Nasdaq Composite sank 2.41% as the 10-year Treasury yield climbed nearly 2%. The Dow Jones Industrial Average (DJIA) rose 0.97% while the small-cap Russell 2000 pushed 0.49% higher.

The rotation seen in markets benefited financial stocks – which generally perform well in a rising rate environment – with Goldman Sachs and Visa rising north of 2%. Meanwhile, Walt Disney shares put in an impressive 6.26% gain. This followed a change to California’s Covid guidelines allowing Disneyland Park to open to the public at the beginning of next month.

On the currency front, the US Dollar rose alongside government bond yields as the US economic outlook continued to strengthen. The House of Representatives will reportedly hold a final vote on the Senate-approved $1.9 trillion stimulus package. Lawmakers will reportedly meet on Wednesday to vote on the measure. Elsewhere, Bitcoin climbed above the 52,000 level as the cryptocurrency rose more than 5%.

Nasdaq, 10-Year Treasury Yield, Bitcoin – 15 Minute Chart

Bitcoin, Yields, Nasdaq

Chart created with TradingView

Tuesday’s Asia-Pacific Outlook

Asia-Pacific markets may face some pressure on Tuesday following the rotation trade seen on Wall Street amid a continued rise in Treasury yields. Hong Kong’s Hang Seng Index (HSI) dropped nearly 2% on Tuesday. Mainland China also saw risk-off flows during the Monday trading session, with the Shanghai Composite suffering a 2.30% loss.

The risk aversion was hardly contained to equity markets, however, with the risk-sensitive New Zealand Dollar losing ground against the Greenback for a fourth consecutive session. NZD/USD is now trading near its lower point since January after capital flows shifted into the safe-haven US Dollar. The Australian Dollar underperformed the USD as well. Today’s economic docket is light but traders will go over Japan’s final GDP read for Q4, due out this morning.

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NZD/USD Technical Outlook

The New Zealand Dollar lost ground against the Greenback after piercing below trendline support late last week. The cross is seeing a small bounce this morning near the 78.6% Fibonacci retracement level from the December – February move. Breaking below that Fib level may open the door for prices to fall to its 100-day Simple Moving Average. The bullish alternative would see prices climb above the 61.8% Fib and then take aim at reclaiming the aforementioned trendline.

NZD/USD Daily Chart

NZD/USD

Chart created with TradingView

NZD/USD TRADING RESOURCES

--- Written by Thomas Westwater, Analyst for DailyFX.com

To contact Thomas, use the comments section below or @FxWestwater on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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