NZD / USD climbed above 0.7250 amid risk appetite

• The NZD / USD has recovered from last Friday’s lows and is above 0.7250, but is far from recovering from last week’s losses.
• NZD is the beneficiary of strong risk flows that have raised the S&P 500 more than 2.5% on the day.

The pair NZD / USD It has remained in range since the end of the Asian session, trapped between the parameters of 0.7220 (last Friday’s lows) and 0.7290 for most of the session, although the pair has maintained a positive bias and it seems that it will close the trade. Monday with gains of around 0.5% or around 40 pips.

Monday’s recovery is very modest compared to the selling pressure on the NZD / USD in the last two days of last week; From the start of the European session last Thursday until the close of the forex market last Friday, the NZD / USD pair fell from multi-year highs above 0.7450 to a low of 0.7220, down 3.2% or almost 250 pips in just two days. Therefore, it is possible that sometime before the NZD / USD returns to the high highs of last week.

For now, the pair appears content to hold above its 21-day moving average, which currently sits at 0.7245. If the pair falls below this level, even stronger support would reside to the downside in the form of the 50 DMA, which has provided strong support three times since January 28 and has not been broken since the beginning of January. last november. The 50 DMA is currently modestly above the 0.7200 level and subsequently buyers on dips are likely to be tempted to jump the closer the pair approaches this level.

ING comments that now “they expect inflation to rise above 3.5% in the second quarter.” Although the Fed has said that this expected increase in inflation will not be sustained and therefore does not warrant a policy response, ING believes that “there is a growing risk that inflation will end up being a bit more rigid around the mark of the 3% given the outlook, the stimulus boosted demand in the face of an economy with limited supply and companies take the opportunity to rebuild margins. “Thus, the bank concludes, although” the Federal Reserve tells us that they do not believe that interest rates will rise before 2024 … we feel this will be increasingly difficult to reconcile with the data … (and) mid-2023 seems increasingly likely to be the starting point for higher interest rates in the United States. “

Looking ahead, USD traders have a busy week with the February ISM Services PMI Survey on Wednesday, Fed Chairman Jerome Powell speaking on Thursday, and the official February labor market report on Friday. Meanwhile, NZD traders will be on the lookout for news of the discovery of more Covid-19 infections in Auckland after the city entered a new 7-day lockdown over the weekend after a case of local broadcast. The terms of trade data for Q4 2020 will also be worth looking at and will be released at 9:45 PM GMT on Monday, while RBNZ Governor Adrian Orr will speak at 01:00 GMT on Thursday.

Technical levels