- NZD/USD hits fresh selloff on Wednesday and approaches a two-week low again.
- A nice rally in US bond yields reignites demand for the dollar and puts some pressure on the pair.
- A softer risk tone also benefits the safe-haven USD and weighs on the perceived riskier NZD.
The pair NZD/USD has struggled to take advantage of the previous day’s nice bounce from the 0.6420 area, or a near two-week low, and has come under renewed selling pressure on Wednesday. The pair maintains its selling tone during the European session and now falls to daily lows just below the 0.6450 level.
The US dollar was in demand again amid a further rise in US Treasury yields and proved to be a key factor putting downward pressure on the NZD/USD pair. In fact, the performance of Benchmark 10-year US government bond surged above 3.0% againapproaching a nearly four-week high touched earlier this week amid concerns over persistent inflation.
Investors continue to worry that global supply chain disruption caused by the Russian-Ukrainian war continues to drive up consumer prices. This could force the US central bank to tighten its monetary policy at a faster pace. Therefore, the market’s attention will remain focused on the latest US consumer inflation figures, due to be published on Friday.
In the meantime, doubts about the possibility that central banks can raise interest rates to curb inflation without affecting economic growth, curbed the optimism of the markets. This further benefited the safe-haven USD and pulled money flows away from the risk-sensitive NZD, supporting prospects for an extension of the intraday decline.
In the absence of top-tier US economic data on Wednesday, US bond yields will play a key role in influencing dollar price action and provide some momentum to the NZD/USD pair. Apart from this, investors will follow the signs of the risk sentiment of the market in general to take advantage of the short-term opportunities around the pair.
NZD/USD technical levels
Source: Fx Street
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