NZD/USD sticks to modest intraday gains above 0.6300 mark, lacks follow-through

NZD/USD sticks to modest intraday gains above 0.6300 mark, lacks follow-through

Time Stamp: February 7, 2023 2:19 AM
Source Node: 1943042

Share:

  • NZD/USD attracts some buyers on Tuesday amid a modest USD weakness.
  • Hawkish Fed expectations limit the USD losses and keep a lid on the major.
  • Traders now look forward to Fed Chair Powell’s speech for a fresh impetus.

The NZD/USD pair gains some positive traction on Tuesday and moves further away from a one-month low, around the 0.6270 region touched the previous day. Spot prices, however, trim a part of the intraday gains and retreat to the 0.6320-0.6325 area during the early European session.

The US Dollar edges lower and stalls the upbeat US jobs data-inspired strong recovery momentum from a nine-month low amid a modest downtick in the US Treasury bond yields. This, in turn, is seen as a key factor acting as a tailwind for the NZD/USD pair. The downside for the USD, meanwhile, remains limited amid speculations that the Federal Reserve will stick to its hawkish stance for longer.

The upbeat US monthly jobs report (NFP) released on Friday pointed to the underlying strength in the labor market and could allow the US central bank to keep raising interest rates. This should act as a tailwind for the US bond yields and lend support to the USD. Apart from this, the prevalent cautious market mood benefits the greenback’s relative safe-haven status against the risk-sensitive Kiwi.

The fundamental backdrop seems tilted firmly in favour of the USD bulls, though investors might prefer to wait on the sidelines ahead of Fed Chair Jerome Powell’s appearance later today. Powell’s remarks on inflation and monetary policy will be looked for clues about the Fed’s rate-hike path. This, in turn, will influence the USD and provide a fresh directional impetus to the NZD/USD pair.

From a technical perspective, the post-NFP slump below the 0.6425 horizontal support suggests that the path of least resistance for the NZD/USD pair is to the downside. This further makes it prudent to wait for strong follow-through buying before confirming that the recent pullback from the highest level since June 2022 has run its course and positioning for any meaningful appreciating move.

Technical levels to watch

Time Stamp:

More from FX Street