Search ForexCrunch
  • NZD/USD staged a modest bounce from multi-month lows amid some USD profit-taking.
  • The risk-on flow weighed on the safe-haven USD and benefitted the perceived riskier kiwi.
  • A combination of factors might limit the USD downside and cap the upside for the major.

The NZD/USD pair built on its steady intraday recovery from four-month lows and climbed to fresh session tops, around the 0.6975 region in the last hour.

The pair managed to gain some positive traction on the last trading day of the week and trimmed a part of this week’s heavy losses to the lowest level since late November. A generally positive tone around the equity markets prompted traders to take some profits off their US dollar bullish bets and benefitted the perceived riskier kiwi.

However, the upbeat US economic outlook amid the impressive pace of coronavirus vaccinations and a fresh leg up in the US Treasury bond yields might help limit any meaningful USD decline. Thursday’s better than expected US Jobless Claims, which fell to a one-year low of 684K, reinforced the narrative of a relatively faster US economic recovery.

Adding to the optimism, US President Joe Biden – in his first formal news conference on Thursday – said that he would double the vaccination rollout plan. Having reached the previous goal of 100 million shots well ahead of schedule (42 days), Biden made an ambitious pledge of administering 200 million vaccine shots in 100 days.

This, in turn, suggests that a modest uptick witnessed around the NZD/USD pair was solely led by short-covering amid slightly oversold conditions. Hence, any subsequent recovery towards the key 0.7000 psychological mark might still be seen as an opportunity for bearish traders and runs the risk of fizzling out rather quickly.

Market participants now look forward to the US economic docket, featuring the releases of Personal Income/Spending figures for February, Core PCE Price Index and revised Michigan Consumer Sentiment index. The data could provide further hints about the US economic strength, which, in turn, might influence the USD and provide some impetus to the NZD/USD pair.

Technical levels to watch