NZD/USD slides back closer to one-week lows, around 0.6980 region

• A combination of factors failed to assist NZD/USD to capitalize on its intraday positive move.
• COVID-19 jitters, a modest pickup in the USD demand prompted fresh selling at higher levels.
• Investors now look forward to the US economic data for a fresh impetus ahead of Friday’s NFP.

The NZD/USD pair surrendered its intraday gains and dropped to fresh daily lows, around the 0.6980 region during the early European session.

The pair gain some positive traction during the early part of the trading action on Wednesday, though struggled to capitalize on the move or find acceptance above the key 0.7000 psychological mark. Investors remain worried about the economic impact of the spread of the highly infectious Delta variant of the coronavirus through many Asian countries. This, along with a modest US dollar strength, capped the upside for the NZD/USD pair, rather prompted some fresh selling at higher levels.

The USD remained supported by speculations that the Fed will tighten its monetary policy if price pressures continue to intensify. The market expectations were further fueled by Richmond Fed President Thomas Barkin's comments on Monday, saying that the central bank has made substantial further progress toward its inflation goal to begin tapering asset purchases. The already stronger buck was further underpinned by Tuesday's upbeat US Consumer Confidence Index, which soared to a fresh pandemic high in June and pointed to growing optimism above the economy.

With the latest leg down, the NZD/USD pair has now drifted into the negative territory for the fourth consecutive session and seems all set to prolong its recent pullback from the vicinity of the 0.7100 mark. Market participants now look forward to the US economic docket – featuring the release of ADP report on private-sector employment, Chicago PMI and Pending Home Sales – for a fresh impetus later during the early North American session. The key focus, however, will remain on Friday's US monthly jobs report (NFP), which could determine the Fed's near-term monetary policy outlook and influence the USD price dynamics. This, in turn, will play a key role in determining the next leg of a directional move for the NZD/USD pair.

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