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  • NZD/USD has recovered more than 20 pips from session lows.
  • The relief could be short-lived, as the New Zealand bond yields are losing altitude.
  • New Zealand employment data renewed fears of an early RBNZ rate cut.

NZD/USD’s bounce from session lows could be short-lived as the yield on the 10-year New Zealand government bond has hit one-month lows.

The currency pair is currently trading at 0.6650, having hit a low of 0.6628 earlier today on the back of weak New Zealand employment data.

While the jobless rate slipped 4.2% in the first quarter, the wage-price inflation rose at a lower than expected rate. Further, the data also showed a 0.2% drop in employment as opposed to the consensus estimate of a 0.5% increase.

The data has likely renewed fears of an interest cut at the next Reserve Bank of New Zealand (RBNZ) policy meeting in May. This is evident from the 10-year New Zealand government bond yield’s drop to a one-month low of 1.88%. The two-year yield, which is more sensitive to rate hike expectations, has also dropped more than four basis points to 1.425%.

As a result, the minor bounce seen in the NZD/USD pair could be short-lived. Technically speaking, the path of least resistance is to the downside, as the descending trendline connecting the March 26 and April 17 highs is intact.

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