NZD / USD returns above 0.7200 as pair adjusts to US dollar dynamics

• The NZD / USD ranged between the 0.7240 and 0.7190 levels and is currently trading around 0.7220.
• The pair has largely traded based on USD dynamics amid New Zealand’s lack of domestic fundamentals.

It’s been a busy day for him NZD / USD, with the pair hitting highs at 0.7240 early in the European session and then falling to session lows below 0.7190 at the start of the US session. As of now, the pair has rallied back to positive territory and is currently trading near 0.7220, up about 20 pips or just over 0.3% on the session.

Kiwifruit adjusts to dollar flows

Amid the lack of notable fundamental developments in New Zealand this week, the kiwi has traded predominantly based on the dynamics of the US dollar and on Thursday it has risen based on the weakness of the dollar. US bond yields spiked on Thursday, but right now they are flat with the 10-year yield hovering around 1.527%; Unlike the previous session, the volatility of the US bond market has not had as much influence on the price action of the dollar.

Instead, it appears that the US dollar has been trading on risk appetite and has weighed heavily on the safe-haven dollar; markets appear to be generating optimism on news of US fiscal stimulus; US President Joe Biden will enact his $ 1.9 trillion stimulus package on Thursday and there are plenty of rumors about his multi-million dollar infrastructure-focused stimulus package, which is slated for the next few months. Meanwhile, strong weekly figures from the US labor market also appear to have contributed to improving risk tone.

Unsurprisingly, risk-sensitive currencies like the NZD have been gaining in tandem with stocks and commodities and kiwi (as well as Aussie) may also be getting some support amid hopes that the rally. of next week between the United States and China could result in a de-escalation of the current tensions.

For reference; Top U.S. and Chinese officials will meet for a two-day summit starting on March 18 (next Thursday), marking the first meeting between senior officials from each country since the Biden administration took office in January. The meeting will set the tone for US-China relations during the first four years of the Biden administration.

Looking ahead, New Zealand’s business PMI for the month of February is scheduled to be released at 9:30 PM GMT and could attract attention. Consensus expectations point to a pullback to 49.8 from 57.5, reflecting some of the disruptions caused by two sudden closures that occurred in the country last month.

Technical levels