- NZD / USD gained strong positive traction for the second day in a row on Monday.
- A combination of factors undermined the USD and continued to support the move.
- The Fed’s aggressive expectations could help limit the USD’s losses and limit the pair’s gains.
The pair NZD / USD It continued to climb higher during the European session and spiked to a three-day high around the 0.7075-800 region in the last hour.
The pair built on the previous session’s bounce from levels just below the 0.7000 psychological level and gained some traction on the first day of a new week. A combination of factors kept the USD bulls on the defensive, which in turn pushed the NZD / USD higher for the second day in a row.
The dollar came under pressure from depressing US data on Friday, which showed consumer confidence slumped to a 10-year low in November amid rising inflation. Aside from this, a further downward stretch in US Treasury yields and risk appetite further undermined the dollar and further benefited the perceived riskier kiwi.
This, coupled with increased bets on another rate hike by the RBNZ, continued to support the ongoing positive move in the NZD / USD pair. That said, aggressive expectations from the Fed could deter traders from placing aggressive bearish bets around the dollar and hold off any significant rally for the pair, at least for now.
Investors seem convinced that the US central bank would be forced to adopt a more aggressive policy response to contain stubbornly high inflationary pressures. In fact, Fed fund futures indicate a 50% probability that the Fed will raise interest rates in July 2022 and a high probability of another increase in November of next year.
Therefore, it will be wise to wait for a strong follow-up buy before confirming that the recent pullback from multi-month highs has run its course. Market participants are now looking forward to the US economic agenda, which features the only release of the Empire State Manufacturing Index, to gain momentum later during the early American session.
Technical levels
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