- NZD/USD attracts some buying on Monday amid subdued USD action.
- The war in Ukraine and aggressive Fed expectations should help limit USD losses.
- The fundamental backdrop warrants some caution for aggressive bulls.
The pair NZD/USD maintains its modest intraday gains during the first half of the European session on Monday, holding positive around the 0.6925/30 region.
Having defended the very important 200-day SMA, the NZD/USD pair attracted fresh buying on Monday and stopped its recent pullback from the psychological level of 0.7000the annual high touched last week. Steady performance in equity markets weighed on the safe-haven US dollar and turned out to be a key factor benefiting the perceived riskier NZD. Uncertainty over Ukraine, coupled with aggressive Fed expectations, helped limit USD losses and should limit any significant rally in the pair, at least for now.
In recent geopolitical events, Ukraine accused Russian forces of carrying out a massacre in the city of Bucha. Furthermore, the British Prime Minister Boris Johnson said that his government would intensify sanctions, as well as military and humanitarian support to Ukraine.. Separately, German Defense Minister Christine Lambrecht said on Sunday that the European Union should discuss a ban on Russian gas imports. This, in turn, should cap any bullish moves in the markets and lend support to the safe-haven USD.
Apart of this, the growing acceptance that the Fed would adopt a more aggressive policy stance to combat stubbornly high inflation it should act as a tailwind for the USD. In fact, the markets have been pricing in a 100 basis point Fed rate hike in the last two meetings, which was reinforced by Friday’s monthly US jobs report. This, in turn, continued to support elevated US Treasury yields, supporting the outlook for some buying around the USD and warrants caution before opening new bullish positions around the NZD/USD pair.
NZD/USD technical levels
Source: Fx Street
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