- Easing Omicron fears continued lending some support to the perceived riskier kiwi.
- A modest USD strength held back bulls from placing fresh bets and capped NZD/USD.
The NZD/USD pair lacked any firm directional bias on Friday and remained confined in a range, around the 0.6825-30 region through the early European session.
A combination of diverging forces failed to provide any meaningful impetus to the NZD/USD pair and led to subdued/range-bound price action on the last trading day of the year. The underlying bullish sentiment in the financial markets continued acting as a tailwind for the perceived riskier kiwi. That said, a modest US dollar strength acted as a headwind and kept a lid on any meaningful gains.
The global risk sentiment remained well supported by the latest optimism over signs that the Omicron variant might be less severe than feared and is unlikely to derail the economic recovery. This, to a larger extent, helped offset concerns about the continuous surge in new COVID-19 cases and boosted investors’ sentiment, which was evident from the recent runup in the global equity markets.
Meanwhile, the greenback gained some traction for the second successive day and was underpinned by Thursday’s upbeat US macro data. In fact, the US Initial Jobless Claims fell more than anticipated, to 198k in the week ended December 24 – marking the lowest level since 1969. Separately, the Chicago PMI also surpassed expectations and rose to 63.1 for the current month from 61.8 in November.
This, in turn, held back traders from placing aggressive bullish bets around the NZD/USD pair and capped the upside. The mixed fundamental backdrop warrants some caution before positioning for the near-term direction amid absent relevant market-moving economic data and thin trading volumes on New Year’s Eve.