- NZD/USD is witnessing a modest pullback from a four-month high hit earlier this Wednesday.
- High US bond yields benefit the USD and cause some intraday profit taking in the pair.
- Risk appetite and rising commodity prices should help limit NZD losses.
The pair NZD/USD moves lower early in the European session and falls to a new daily low, around 0.6950.
The pair has witnessed a modest pullback from 4-month high around 0.6975 region, hit early Wednesday and has returned a portion of the previous day’s strong gains. The recent rally in US Treasury bond yields acted as a tailwind for the US dollar, which in turn led investors to withdraw some gains from their bullish positions around the NZD/USD pair.
The sale in the US bond market accelerated after the president of the Fed , Jerome Powell , suggested that the US central bank could adopt a more aggressive stance to combat inflation. Separately, San Francisco Fed President Mary Daly signaled it was time to undo monetary policy easing, while St. Louis Fed President James Bullard and Cleveland’s Loretta Mester called for faster rate hikes.
Investors were quick to price in a 50 basis point rate hike at the next FOMC meeting and pushed the 10-year US bond yield to the highest level since 2019, helping limit losses around the USD. Having said that, prevailing risk sentiment coupled with rising commodity prices should support NZD of higher perceived risk and warrants caution before confirming that the NZD/USD pair has reached a high.
Even from a technical perspective, the move above the 200-day SMA for the first time since November 2021, it supports the prospects of the appearance of some buying around the NZD/USD pair.
Market participants now expect the Statement by Fed Chairman Jerome Powell, at the BIS Innovation Summit. Aside from this, US bond yields could influence the price dynamics around the US dollar.
Investors will also take cues from further developments surrounding the Russian-Ukrainian war, which will boost broader market risk sentiment and commodity prices. The combination of factors should provide some momentum to the NZD/USD pair and allow investors to take advantage of some short-term opportunities.
NZD/USD technical levels
Source: Fx Street
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