NZD/USD recovers over 300 pips from decade low set earlier, refreshes daily tops

• NZD/USD witnessed a goodish short-covering move amid weaker USD.
• A downward spiral in the US bond yields weighed heavily on the buck.

The NZD/USD pair built on its solid intraday recovery from over a decade low and refreshed session tops, around the 0.6370 region in the last hour, albeit lacked follow-through.

Following a modest bearish gap opening on the first day of a new trading week, the pair witnessed some aggressive selling and nosedived to an intraday low level of 0.6034 – the lowest level since May 2009. Growing worries about the uncontained spread of the deadly coronavirus, accompanied by a plunge in oil prices led to a selloff across the global equity markets and initially drove flows away from perceived riskier currencies – like the kiwi.

Bulls trying to regain control

Against the backdrop of the global flight to safety, firming expectations that the Fed will cut interest rates by another 50 bps on March 18 aggravated the recent slump in the US Treasury bond yields. This eventually weighed heavily on the US dollar and triggered some intraday short-covering move, allowing the pair to recover over 300 pips from daily swing lows.

The selling pressure surrounding the greenback remained unabated through the early North-American session, rather picked up some additional pace after the benchmark S&P 500 index tumbled 7% to trigger a circuit breaker.

The pair is currently hovering around the 0.7270-75 region, or over two-week tops set last Friday, which if cleared should set the stage for an extension of the strong intraday momentum amid absent relevant market moving economic releases from the US.

Technical levels to watch