- NZD/USD witnessed some fresh selling on Wednesday amid renewed USD buying interest.
- A softer risk tone further weighed on the perceived riskier kiwi and added to the selling bias.
- Investors now look forward to the US consumer inflation figures for some meaningful impetus.
The NZD/USD pair traded with a mild negative bias heading into the European session and was last seen hovering near mid-0.7100s, just above daily lows touched in the last hour.
The pair failed to capitalize on the previous day’s goodish rebound from the 0.7100 mark, instead met with some fresh supply and was pressured by a combination of factors. The US dollar was back in demand on Wednesday and recovered the overnight losses amid some stability in the US Treasury bond yields.
The USD was further supported by the upbeat US economic outlook, bolstered by the impressive pace of COVID-19 vaccinations and a massive US fiscal spending plan. The House of Representatives is expected to provide the final approval to US President Joe Biden’s $1.9 trillion pandemic relief package.
Apart from this, a softer risk tone around the equity markets provided an additional boost to the safe-haven greenback. This was seen as another factor weighing on the perceived riskier kiwi and contributed to the offered tone surrounding the NZD/USD pair, though the downside seemed limited.
Market participants see a real risk of an overheated US economy and higher inflation on the back of the planned spending by the Bide Administration. Given that inflation remains a hot topic, investors now seemed reluctant to place aggressive bets ahead of Wednesday’s release of the US CPI figures.
The data, along with a critical ten-year bond-auction in the US, will now play a key role in influencing the USD price dynamics ahead of next week’s FOMC monetary policy meeting. Traders will further take cues from the broader market risk sentiment to grab some short-term opportunities.
Technical levels to watch