NZD/USD nears multi-week low of 0.6540 as fears of coronavirus outbreak grow
- NZD/USD bears keep the baton around more than six-week low.
- New Zealand tourism and meat demand will bear the burden of China’s tough time.
- The economic calendar remains light, keeping attention to coronavirus.
NZD/USD marks no change to the previous day’s close while taking rounds to 0.6544 during the early Asian session on Tuesday. The pair remains near the lowest in six weeks as fears of China’s coronavirus outbreak not only has a negative impact on commodity basket, as well as commodity-linked currencies, but also threaten New Zealand businesses.
Following the suspension of transit in Hubei, China blocks another city, Tangshan in Hebei, as the lethal coronavirus spreads through the humans. The epidemic recalls the memories of SARS and MERS while taking nearly 100 lives so far, not to forget Chinese authorities’ claims of thousands being infected.
While this weighs on the market’s risk tone and export-oriented currencies like the New Zealand dollar, the US 10-year treasury yields and Wall Street aptly portrayed the risk-off by the end of Monday.
Additionally, New Zealand has a special connection with China as its tourism and meat business are heavily relied on Beijing and have recently performed wonders to please the Wellington-based government. In this regard, analysts at the Australia and New Zealand Banking Group (ANZ) said, “China has canceled tour-group bookings; these account for around a third of NZ tourist arrivals from that country. Reduced dining out in China will lower demand for NZ food, which tends to sit at the luxury end of the market where the foodservice channel is very important. This presents a downside risk to both meat and dairy prices in the near term. And the NZD will likely be under pressure.”
Given the lack of major data/events during the Asian session, investors will keep eyes on the headlines from China to determine near-term trade direction.
Technical Analysis
Unless bouncing back beyond 50-day SMA, NZD/USD prices are vulnerable to visit 0.6520 ahead of taking rest on a 200-day SMA level of 0.6511.