Sentiment remained bearish for most of the risk assets, pushing the NZDUSD pair below 0.67 for the first time since November 2020.
Stock markets dived yet again, benefiting the USD as the safe-haven currency. Breaking below December lows of 0.67 confirmed the medium-term bearish trend, with the 0.67 level as the main resistance. As long as the Kiwi trades below it, the outlook appears bearish.
If the negative momentum persists, we could see a quick decline toward 0.66 this week.
Alternatively, the pair must climb above the 0.67 resistance to cancel the immediate downtrend. In that scenario, a relief rally could bring the pair to 0.6780.
This week’s Fed decision could bring a hawkish confirmation that the Fed is ready to raise rates in March, while the balance sheet reduction could start soon after that. Therefore, the USD might continue in its bullish momentum heading into the decision.
On the other hand, considering the recent sell-off in stocks, the central bank might also sound a bit dovish and delay the balance sheet run-off to calm the markets.