- NZD/USD sees a bearish open on Monday, albeit lacks continuation selling.
- The worsening situation in Ukraine boosts the safe-haven US dollar and puts downward pressure on the pair.
- Signs of stability in the markets help the perceived riskier NZD attract some buying at lower levels.
The pair NZD/USD has risen back above the 0.6700 round level during the European session on Monday. At time of writing, the pair is near its daily highs around the 0.6715 level.
The pair opened with a big bearish gap on the first day of a new week in reaction to the latest developments surrounding the Ukraine crisis. President Vladimir Putin upped his ante and put the nuclear armed forces on high alert on Sunday.. This, in turn, fueled safe-haven US dollar demand and weighed heavily on the higher perceived risk NZD.
However, the initial drop was quickly bought near the 0.6670 area amid modest USD pullback from daily high. Market sentiment stabilized somewhat after the Russian trader said that they are interested in reaching an agreement with Ukraine as soon as possible. This, coupled with a pullback in US Treasury yields, acted as a headwind for the USD.
The worsening of the situation in Ukraine seems to have dimmed the prospects for a more aggressive policy response from the Fed to contain stubbornly high inflation. Apart of this, the global flight to the safe haven triggered a sharp drop in US bond yieldswhich capped any further gains in the dollar and offered some support to the NZD/USD pair.
However, the rally attempt lacks bullish conviction as the focus remains on the dialogue between Ukraine and Russia, which will start on Monday at the border between Belarus and Ukraine. Incoming news will influence broader market risk sentiment and USD price action, which in turn should provide a further boost to the NZD/USD pair.
NZD/USD technical levels
Source: Fx Street
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