New Zealand dollar powers higher

The New Zealand dollar has climbed above the 0.68 level on Wednesday. In the North American session, NZD/USD is trading at 0.6816, up 0.65% on the day. The currency has jumped 1.09% this week.

New Zealand dollar showing strong volatility

Volatility is the name of the game, at least in the month of December. With market participants eyeing Christmas and the markets marked by illiquidity, we have been seeing volatility in the currency markets, particularly in minor currencies such as the New Zealand dollar, which are barometers of risk sentiment.

The currency has been moving up and down like a yoyo. Last week, the explosion of Omicron cases across Europe sent risk appetite lower, and NZD/USD fell 0.84%. The currency has rebounded with gains this week of 1.0%, buoyed by reports that Americans and Brits are rushing to get Covid shots while the US and UK governments are securing millions of Covid vaccines. There are conflicting reports as to whether Omicron is as severe as the Delta variant, but it’s clear that Omicron is much more contagious, and there are growing concerns that hospital resources could be stretched past the limit as Omicron spreads in Europe and the US.

The New Zealand dollar’s erratic moves have been due to headline-derived volatility rather than any market trends. Care should be exercised, as this could continue right up to the New Year.

The lockdowns may have been lifted, but the initial relief has dissipated and New Zealanders are feeling a sense of pessimism as we head into 2022. The Westpac Consumer Sentiment Index fell below the 100 level in Q3, which indicates a majority of surveyed consumers were pessimistic about economic conditions. New Zealand has again closed its borders, in an attempt to keep a tight lid on the few Omicron cases that have been detected in the country. Will the island nation manage to stave off another wave of Covid? Only time will tell.

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NZD/USD Technical

• There is resistance at 0.6813. Closely above is resistance at 0.6889
• NZD/USD has weak support at 0.6681. Below, there is support at 0.6625

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