- Upbeat NZ CPI report assisted NZD/USD to gain some positive traction on Wednesday.
- Renewed COVID-19 jitters benefitted the safe-haven USD and capped gains for the pair.
The NZD/USD pair held on to its modest gains through the early European session, albeit lacked any strong follow-through buying and remained confined in a range around the 0.7175 region.
Following the previous day’s pullback of around 55 pips from one-month tops, the pair managed to regain some positive traction on Wednesday following the release of NZ inflation figures. According to data released by Statistics New Zealand, the headline CPI rose 0.8% in the quarter ended March and the yearly rate edged higher to 1.5%. The readings were slightly better-than-expected, which, in turn, extended some support to the NZD/USD pair.
The positive factor, to a larger extent, was offset by renewed fears about another dangerous wave of coronavirus infections in some countries. The market worries were evident from the prevalent cautious mood around the equity markets, which extended some support to the safe-haven US dollar and capped gains for the perceived riskier kiwi. The USD uptick, however, lacked follow-through amid reduced bets for an earlier than anticipated Fed lift-off.
Investors now seemed convinced with the view that any spike in inflation is likely to be temporary and that the Fed will keep interest rates near zero levels for a longer period. This might hold the USD bulls from placing aggressive bets and help limit the downside for the NZD/USD pair. Even from a technical perspective, acceptance above 100-day SMA supports prospects for a move back to the 0.7230 region, or overnight swing highs.
There isn’t any major market-moving economic data due for release from the US, leaving the NZD/USD pair at the mercy of the USD price dynamics. Apart from this, traders might further take cues from the broader market risk sentiment to grab some short-term opportunities around the major.
Technical levels to watch