- NZDUSD consolidates last week’s recovery after the CPI and hits a two-month high.
- The rebound in US bond yields helps revive demand for the dollar and acts as a headwind for the pair.
- The drop remains limited amid growing expectations for smaller rate hikes from the Fed.
The pair NZDUSD struggles to build on last week’s breakout momentum through the 100-day SMA and swings between tepid gains and small losses during the early hours of the European session on Monday. The pair is currently below the level of 0.6100almost unchanged for the day, and remains close to a two-month high touched on Friday.
A combination of factors helps US dollar stalls at lowest level since mid-August, inspired by US consumer inflation figures, which in turn acts as a headwind for the NZDUSD pair. US Treasury bond yields rose in reaction to more aggressive comments from Fed Governor Christopher Waller on Sunday. This along with softer tone in equity markets benefits safe-haven dollarand puts some downward pressure on the risk-sensitive Kiwi.
During a conversation in Sydney, Australia, Waller noted that markets have overreacted to last week’s data on inflation. of consumer prices in October, which were softer than expected. Waller added that the Fed wasn’t easing its fight against inflation and that it will take a series of soft CPI reports for the US central bank to take its foot off the brake. This pushes US Treasury yields higher and helps revive demand for the dollar, although the intraday rally lacks bullish conviction.
the firm Expectations that the Fed will slow the pace of its policy tightening are preventing dollar bulls from opening aggressive positions. Furthermore, optimism about an eventual easing of COVID-19 measures in China offers some support to the NZDUSD pair and limits the fall. Therefore, the intraday price movement could be categorized as a bullish consolidation phase, suggesting that any significant pullback is more likely to be bought and kept capped.
There will be no major US economic releases on Monday, leaving the dollar at the mercy of US bond yields. Other than this, traders will be guided by Fed Governor Lael Brainard’s scheduled speech. This, coupled with broader risk sentiment, will be looked at for short-term opportunities around the NZDUSD pair ahead of the Chinese data release on Tuesday.
NZDUSD technical levels
Source: Fx Street
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