• NZD/USD fell below the 100-day SMA to a low of 0.6133 but recovered and stabilized at 0.6160.
• The USD gained ground on upbeat Housing Data, all eyes on Jerome Powell’s testimony.
• Market mood turned cautious amid PBoC rate cut.

On Tuesday, while US traders returned from their three-day weekend, the NZD/USD dropped to its lowest level in over a week, towards the 0.6130 area. The announcement by the People’s Bank of China (PBoC) to cut rates and a strong USD are the main reasons why the Kiwi weakened.

PBoC cut rates, while the US released upbeat housing data

During the Asian session, the People's Bank of China announced a reduction of the benchmark Loan Prime Rates (LPRs) by 10 basis points (bps). Moreover,  the one-year LPR was cut from 3.65% to 3.55%, while the five-year LPR from 4.30% to 4.20%. In that sense, the rate cuts reminded investors about the weakness seen in the Chinese economic activity, and as China is a huge trading partner of New Zealand, the Kiwi lost traction.

On the other hand, Housing Starts data released by the US Census Bureau for May exceeded expectations, demonstrating a notable increase of 21.7% vs the anticipated decline of 0.8%. In addition, Building Permits from the same month increased 5.2%, while the consensus was a 5% decline. As a reaction, the Greenback, as per the DXY index, held its ground at 102.60, seeing gains on the day despite a decline in US bond yields seen across the board, which signal a cautious market mood amid higher demand for safe-haven bonds. In that sense, the 10-year rate led the fall, seeing a 2.35% decline on the day to 3.73%.

Attention now turns to Jerome Powell's testimony before Congress during Wednesday's session, where investors will look for any clues regarding the Federal Reserve monetary policy. In addition, the release of Jobless Claims data on Thursday and S&P PMI data on Friday can also have an impact on the USD price dynamics