- NZD/USD rose for the second day in a row amid dollar profit-taking.
- Stronger-than-expected quarterly inflation data from New Zealand also offered some support.
- The rally in US bond yields helped limit dollar losses and capped the pair’s gains.
The pair NZD/USD it was supported by last week’s bounce from the 0.6060 zone, its lowest level since May 2020, and gained traction for the second day in a row on Monday. The momentum took the pair above a one-week low, though it was lacking in continuity and teetered near the round 0.6200 level.
Several Federal Reserve officials signaled last week that they were not in favor of a higher rate hike than markets were expecting after the release of rising US consumer inflation. This, in turn, forced investors to cut their bets on a 100 basis point Fed rate hike in July, which continued to undermine the US dollar and offered some support to the NZD/USD pair.
Aside from this, a generally positive tone around equity markets dragged the safe-haven dollar away from its two-decade highs. This, coupled with stronger-than-expected quarterly inflation data from New Zealand, benefited the risk-sensitive kiwi. The boost in risk appetite, meanwhile, pushed up US Treasury yields, helping to limit dollar losses and limit any further gains.
The pair has pulled back to the 0.6165 area, which warrants some caution before positioning for any significant upside. In the absence of any major economic data out of the US, NZD/USD remains at the mercy of dollar price action. This makes it prudent to wait for a strong buying follow-through to confirm that the pair has formed a short-term bottom.
Technical levels
Source: Fx Street
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