- A combination of factors helps the NZD / USD gain positive traction on Thursday.
- The pullback in US bond yields keeps USD bulls on the defensive and offers some support for the pair.
- The NZD received an additional boost from the New Zealand government’s plans to allow non-quarantine travel.
- The lack of subsequent buying warrants the bulls’ caution amid optimistic expectations from the Fed.
The pair NZD / USD it maintains its modest intraday gains at the start of the European session on Thursday, staying near the upper end of its daily trading range around the 0.7170-75 region.
The pair managed to regain positive traction on Thursday and has recovered part of the drop after the publication of the US CPI the previous day of more than 120 pips to one-week lows. The rally marks the first day of positive movement in the previous three and has been supported by a combination of factors.
A modest pullback in US Treasury yields. it has prevented US dollar bulls from opening aggressive positions. The NZD / USD pair has received an added boost after New Zealand Prime Minister Jacinda Ardern said she is exploring non-quarantine travel with other countries.
Despite the support factor, the pair NZD / USD has lacked strong continuation buying interest. An increase in US consumer prices has fueled the speculation that the Fed will raise rates to suppress inflation, which has acted as a tailwind for the USD and limited the pair’s gains.
It is worth reporting that the Headline CPI posted the fastest rise since September 2008, accelerating to a 4.2% year-on-year rate in April, significantly above the Fed’s 2% target. Added to this, the core CPI (excluding food and energy) increased 3.0% year-on-year during the reported month.
Apart of this, the prevailing environment of risk aversion, as shown by an intraday drop in US equity futures, has further benefited the safe haven US dollar. This could also help limit any significant rises in perceived riskier currencies such as the NZD.
Market participants now await the release of the IPP producer price index and initial claims and US weekly unemployment. This, along with US bond yields and broader market risk sentiment, will influence the USD and could generate some momentum to the NZD / USD pair.
NZD / USD technical levels
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