- NZDUSD reverses an intraday decline and rises to a nearly two-month high on Friday.
- The USD consolidates the fall after the US CPI and continues to provide some support to the pair.
- The prevailing risk appetite provides an additional boost to the risk-sensitive NZD.
- The lack of continuation of buying beyond the 100-day SMA warrants caution for the bulls.
The pair NZDUSD It attracts some buying near the 0.5985 region on Friday and hits a nearly two-month high early in the European session. The pair is currently trading just below 0.6050 and looks to build on momentum beyond the 100-day SMA.
The US dollar is struggling to make a significant recovery and is weakening near its lowest level since August 26, which in turn offers some support to the NZDUSD pair. The softest numbers on US consumer inflation published on Thursday reaffirmed the market expectations that the Fed will slow the pace of its policy tightening. This was evident in the sharp drop in US Treasury yields and continues to weigh on the dollar.
The prospect of lower interest rate hikes by the US central bank boosted the investor appetite for riskier assets. This follows from the strong rally in equity markets, which could be cited as another factor weighing on the safe-haven dollar, acting as a tailwind for the risk-sensitive kiwi. That said, concerns about headwinds stemming from China’s zero-covid policy could dampen optimism.
In addition, the markets continue to value the possibility of a Fed rate hike of 50 basis points at the next monetary policy meeting in December. This, in turn, could help alleviate the bearish pressure surrounding the dollar and limit the rise of the NZDUSD pair, at least for now. On the other hand, the lack of a strong buying follow-up justifies some caution on the part of the bulls. However, the pair is still on track to post gains for the fourth week in a row.
Market participants now await the US economic docket, highlighting the release of the Preliminary US Consumer Sentiment Index from Michigan later in the American session. This, coupled with US bond yields and general market risk sentiment, will influence dollar price dynamics and provide some momentum to the NZDUSD pair.
NZDUSD technical levels
Source: Fx Street
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