- NZD/USD built on its modest bullish weekly gap opening and recovered a part of Friday’s slump.
- A subdued USD demand, the risk-on mood extended some support to the perceived riskier kiwi.
- The USD downside seems limited ahead of the FOMC meeting, warranting some caution for bulls.
The NZD/USD pair edged higher through the first half of the European session and was last seen hovering near the top end of its intraday trading range, around mid-0.7100s.
The pair opened with a modest bullish gap on the first day of a new trading week and recovered a part of the previous session’s slump to the 0.7100 neighbourhood or the lowest level since early May. The uptick was supported by a subdued US dollar demand and the underlying bullish sentiment in the financial markets, which tends to benefit the perceived riskier kiwi.
The greenback struggled to capitalize on Friday’s strong move up, albeit remained well supported by expectations that the Fed might begin the discussion on tapering its asset purchases in the face of rising inflationary pressures. It is worth recalling that the latest US CPI report released last week showed the pace of inflation in the US climbed to a 13-year high in May.
Hence, the key focus will remain on the upcoming FOMC monetary policy meeting on June 15-16. Apart from this, a modest uptick in the US Treasury bond yields might hold investors from placing any aggressive bearish bets around the USD. This makes it prudent to wait for some strong follow-through buying 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. That said, the US bond yields might continue to play a key role in influencing the USD price dynamics. Traders might further take cues from the broader market risk sentiment to grab some short-term opportunities around the NZD/USD pair.
