- NZD/USD gains positive traction on Wednesday and breaks a four-day losing streak to a new one-year low.
- A pullback in US bond yields and risk appetite weigh on the safe-haven USD.
- Expectations of an aggressive Fed rate hike should support USD losses and cap the pair’s rally ahead of the US CPI report.
The pair NZD/USD continued its steady intraday rise during the first half of the European session on Wednesday and reached a new daily high, around the level of 0.6350 in the last hour. At time of writing, the pair quotes at 0.6338, still up 0.76% on the day.
The pair witnessed a short-covering bounce on Wednesday and for now, appears to have broken a four-day losing streak to its lowest level since June 2020, around the 0.6275 area touched the previous day. The current pullback in US Treasury yields caused some selling around the dollar. Aside from this, the strong recovery in global risk sentiment further weighed on the safe-haven USD and offered support to the perceived riskier NZD.
Having said that, Lingering fears of a recession, amid strains in global supply chains resulting from China’s zero-covid policy and the war in Ukraine, acted as a tailwind for the dollar.. Indeed, markets seem convinced that the Federal Reserve will need to tighten monetary policy at a faster pace to combat stubbornly high inflation and are pricing in rate hikes of up to 200 basis points for the rest of 2022. This, despite in turn, should limit dollar losses and limit NZD/USD gains.
Therefore, the focus will be on the latest US consumer inflation figures, to be released later at the start of the American session. The US CPI report will influence the Fed’s tightening path and short-term USD price dynamics. This, coupled with the broader market risk sentiment, should give the NZD/USD pair a significant boost and allow investors to take advantage of some short-term opportunities.
NZD/USD technical levels
Source: Fx Street
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