- NZD/USD managed to recover around 25 pips from weekly lows touched earlier this Thursday.
- Retreating US bond yields undermined the USD and remained supportive amid a positive risk tone.
- The upbeat US economic outlook should help limit the USD downside and cap gains for the major.
The NZD/USD pair remained depressed through the first half of the European session, albeit has managed to rebound around 25 pips from weekly lows.
Having repeatedly struggled to find acceptance above the key 0.7000 psychological mark, the pair edged lower during the early part of the trading action on Thursday. However, a combination of factors that extended some support to the NZD/USD pair helped limit any deeper losses, at least for the time being.
The yield on the benchmark 10-year US government bond retreated further from 14-month tops and slipped to the 1.70% threshold. This, in turn, kept the US dollar bulls on the defensive. Apart from this, a generally positive tone around the equity market further benefitted the perceived riskier kiwi.
Meanwhile, the optimistic outlook for the US economy might continue to underpin the greenback, which, in turn, should keep a lid on any meaningful upside for the NZD/USD pair. Hence, any move beyond the 0.7000 mark might still be seen as an opportunity for bearish traders and remain limited.
Investors remained hopeful about the prospects for a relatively faster US economic recovery amid the impressive pace of coronavirus vaccinations and US President Joe Biden’s spending plan. In fact, the Democratic president unveiled a more than $2 trillion infrastructure package on Wednesday.
Market participants now look forward to the US economic docket, highlighting the release of ISM Manufacturing PMI. This, along with the US bond yields might influence the USD price dynamics and allow traders to grab some short-term opportunities during the early North American session.
Technical levels to watch