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NZDUSD consolidates in a range around 0.6100, close below Friday's two-month high
It is anticipated that NZDUSD will consolidate last week's post-US CPI surge to a two-month high. Rising US bond yields stimulate USD demand and serve as a headwind. The downside potential remains restricted in light of increased wagers on Fed rate rises that are less aggressive.
Through the early European session on Monday, the NZDUSD pair struggles to benefit on last week's breakthrough momentum through the 100-day Simple Moving Average, oscillating between modest gains and slight losses. The pair is currently trading slightly below the 0.6100 level, almost flat on the day, and stays within striking distance of Friday's two-month high.
A confluence of variables enables the US Dollar to halt its decline to its lowest level since mid-August, acting as a headwind for the NZDUSD pair. In response to Christopher Waller's more hawkish comments on Sunday, the yields on U.S. Treasury bonds increase. This, together with a weaker tone on equities markets, is believed to help the safe-haven dollar and place some downward pressure on the risk-averse New Zealand dollar.
During a conversation in Sydney, Australia, Waller stated that the markets had overreacted to last week's weaker-than-anticipated consumer price inflation figures for October. Waller said that the Fed was not easing its fight against inflation and that a spate of mild CPI figures would be required for the US central bank to ease its stance. This raises US Treasury bond yields and helps boost USD demand, notwithstanding the lack of positive conviction in the intraday increase.
A rise in the likelihood that the Federal Reserve would decrease the pace of its policy tightening discourages USD bulls from putting aggressive wagers. In addition, optimism regarding a potential rollback of COVID-19 measures in China provides some support for the NZDUSD pair and limits its downside. Consequently, the intraday muted price movement may be classified as a bullish consolidation phase, implying that any major pullback is likely to be bought and remain limited.
On Monday, the US is not scheduled to provide any market-moving economic data, putting the USD at the mercy of US bond yields. Traders will also take cues from Lael Brainard's expected speech as Fed governor. This, coupled with the broader risk mood, will be evaluated for short-term trading opportunities in the NZDUSD pair prior to Tuesday's Chinese data release.
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