- NZD/USD once again managed to rebound from the 0.7100 mark amid some USD profit-taking.
- A sharp pullback in the US bond yields and the risk-on mood weighed on the safe-haven buck.
- The upbeat US economic outlook might help limit the USD slide and cap gains for the pair.
The NZD/USD pair edged higher during the early European session and refreshed daily tops, around the 0.7135 region in the last hour.
The pair once again managed to find some support near the 0.7100 round-figure mark and for now, seems to have stalled its recent sharp corrective slide from the highest level since August 2017. The US dollar witnessed some profit-taking from three-and-half-month tops, which, in turn, was seen as a key factor that extended some support to the NZD/USD pair.
As investors looked past the passage of a massive US fiscal spending bill, comments by US Treasury Secretary Janet Yellen on Monday led to a sharp pullback in the US Treasury bond yields. Yellen said that the package would provide enough resources to fuel a very strong US economic recovery and added that there are tools to deal with inflation.
It is worth recalling that the US Senate voted 50-49 in favour of US President Joe Biden’s $1.9 trillion pandemic relief package. This, along with expectations for an uptick in US inflation, pushed the yield on the benchmark 10-year US bond back above the 1.60%, or over one-year tops touched in reaction to stunning US monthly jobs report on Friday.
Apart from this, the risk-on mood was seen as another factor that weighed on the safe-haven USD and benefitted the perceived riskier kiwi. That said, the optimism over a relatively faster US economic recovery should continue to underpin the greenback, warranting some caution before positioning for any further appreciating move for the NZD/USD pair.
There isn’t any major market-moving economic data due for release from the US on Tuesday. Hence, the US bond yields and the broader market risk sentiment will continue to play a key role in influencing the USD price dynamics. This, in turn, could provide some impetus and allow traders to grab some short-term opportunities around the NZD/USD pair.
Technical levels to watch