NZD/USD finds support near 0.6220; fall seems more likely on China's Covid worries

China's anti-Covid shutdown protests have weakened commodity-linked currencies, resulting in a gap-down start for the NZD/USD pair around 0.6220. The New Zealand dollar has declined during the previous week after failing to surpass the round-level barrier of 0.6300.

Increasing civil risks in China as individuals have taken to the streets to demonstrate their defiance against the zero-tolerance policy. Global markets have become more risk-averse as a result of Chinese leader Xi Jinping's cautious stance and dictatorial structure. This has created a risk of economic expansion and may exacerbate the already fragile real estate market. Increasing apprehensions of civic dangers could also result in political instability, which could have a protracted negative impact on economic structure.

Notably, New Zealand is one of China's main commercial partners, and turbulence in China could affect the New Zealand Dollar.

Meanwhile, the US Dollar Index (DXY) is benefiting from investors' liquidity as the appeal of safe-haven assets has drastically increased. The USD Index is hanging around 106.20 and striving for volatility shrinkage as China's anti-locking protests boost the downside and prospects of a pause in a larger rate hike spell by the Federal Reserve limit the upside (Fed).

S&P500 futures are under intense pressure from market players due to a risk-averse market sentiment. Yields on 10-year US Treasuries have fallen further to about 3.68 percent in anticipation of a speech by Fed chief Jerome Powell on Wednesday. The Fed Chair's speech may clarify rumors regarding a halt to the Fed's current rate hiking schedule.