The NZD/USD pair rose for the second day in a row, despite weak USD demand.
Dollar bulls were on the defensive as the chances of an earlier Fed rate hike dwindled.
Bulls were deterred from placing new wagers on the kiwi because of a weaker risk tone.
During the early European session, the NZD/USD pair moved with a slight positive bias, and was last seen trading around the upper end of its daily trading range, around 0.7025-30.
On Monday, the pair built on Friday’s recovery move from two-week lows, gaining some follow-through strength for the second straight session despite weak US dollar demand. However, a number of variables prevented bulls from making aggressive wagers, putting a cap on any major rise for the NZD/USD pair for the time being.
The headline NFP data revealed that the US economy added 850K jobs in June, far more than expected. However, the strong performance was tempered by an unexpected increase in the unemployment rate, which allayed concerns about an earlier Fed rate hike. As a result, investors were forced to reduce their USD long holdings, giving the NZD/USD pair some support.
Meanwhile, a generally lower tone across the equities markets nullified the supporting effect to a greater extent. This operated as a headwind for the kiwi, which saw advances on the NZD/USD pair restricted. Investors were especially hesitant due to the relatively tight liquidity conditions in the aftermath of the US Independence Day vacation.
The market’s attention now moves to the FOMC meeting minutes, which will be released on Wednesday. Investors will be looking for signs about the Fed’s monetary policy outlook in the near future. This will have a big impact on the USD price dynamics in the short term, and it will assist define the next leg of the NZD/USD pair’s directional move./n
