The NZDUSD pair remains on the defensive on Monday, as risk aversion fuels the safe-haven US dollar demand against high-yielding currencies including the kiwi. The New Zealand currency also feels the additional pressure from a plunge in oil prices, with Brent trading below the $60 handle for the first time since early-November. At the start of the trading week, the futures registered fresh multi-week lows around $57.70 and struggle to regain the $58 figure since then.
At this stage, the pair is trading at a critical point as the NZD has formed a triangle in the daily charts and is now close to its bottom. An important support comes at the five-week lows registered on Monday around 0.6554. Should the price manage to hold above this level and initiate a local recovery from this region and retarget the 0.66 handle initially. However, it looks like the pair will likely break the support line and dip towards the 200-daily moving average which comes just above the 0.65 figure. Of note, NZD is under a double selling pressure, both as a commodity-related currency and as a high-yielding asset. As long as coronavirus concerns persist in the global markets, risk aversion will continue to cap the possible bullish attempts.
Apart from the Chinese theme, traders will pay close attention to the upcoming two-day Federal Reserve meeting that concludes on Wednesday. The meeting will likely be a non-event in the context of any changes to the current state of the central bank’s monetary policy. Nevertheless, USD-pairs may be affected by the bank’s rhetoric. If Powell strikes a relatively upbeat tone in the context of the economic outlook, the greenback may receive the additional bullish boost. If so, the risk of a breakdown to the 200-daily moving average will rise substantially. In the immediate term, a daily close below the mentioned key support will signal an even more bearish technical picture for the kiwi. Traders will also continue to monitor dynamics in the oil market. Should Brent regain at least the $59 figure in the near term, downside risks for the NZDUSD pair will ease partially.