- NZDUSD regains positive traction on Friday and draws support from a combination of factors.
- A modest USD pullback and positive risk tone offer some support for the risk sensitive Kiwi.
- The aggressive outlook on the Fed should help limit USD losses and cap the pair ahead of the NFP.
The pair NZDUSD it attracts fresh buying near the 0.5755 region on Friday and reverses the previous day’s drop to more than a week’s low. The pair maintains its buying tone throughout the European session and is currently near the daily high above the level of 0.5800.
The US dollar pauses post-FOMC recovery and for now it seems to have snapped a six-day winning streak, which in turn offers support to the NZDUSD pair. A generally positive tone around equity markets weighs on the dollar as a refuge and benefits the Kiwi, sensitive to risk. Aside from this, the dollar’s decline could be attributed to a repositioning trade ahead of the US monthly employment report, due later in the American session.
Having said that, elevated US Treasury yields, bolstered by a more hawkish stance taken by the Fed, should cap any deeper USD pullback and limit the gains of the NZDUSD pair. It should be remembered that Fed Chairman Jerome Powell downplayed expectations of a dovish turn and said it was premature to talk of a pause in the rate hike cycle. Powell added that the terminal rate will remain higher than expected and caused a sharp rise in US Treasury yields.
Indeed, the two-year US government bond yield, highly sensitive to expectations of rising interest rates, hit a 15-year high on Thursday and approached the psychological 5% level. Meanwhile, the benchmark 10-year US Treasury bond remains above the 4.0% level and favors dollar bulls.
NZDUSD technical levels
Source: Fx Street
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