NZD/USD sticks to modest intraday gains above 0.6300 amid softer USD, positive risk tone

  • NZD/USD regains positive traction on Thursday amid the emergence of fresh USD selling.
  • Sliding US bond yields and a positive risk tone seem to weigh on the safe-haven greenback.
  • Recession fears could act as a headwind for the risk-sensitive Kiwi ahead of the US Q3 GDP.

The NZD/USD pair attracts some buying on Thursday and reverses a part of the previous day’s slide to the 0.6275 area, or a fresh monthly low. The pair sticks to its gains through the first half of the European session and is currently placed around the 0.6310-0.6315 region, just a few pips below the daily top.

A combination of factors exerts weighs on the US Dollar, which, in turn, is seen acting as a tailwind for the NZD/USD pair. The recent recovery in the global risk sentiment – as depicted by a generally positive tone around the equity markets – continues to undermine the safe-haven buck and benefits the risk-sensitive Kiwi. The greenback is further pressured by the ongoing pullback in the US Treasury bond yields.

In fact, the yield on the benchmark 10-year US government bond retreats further from the monthly top touched the previous day amid expectations that the Fed will pivot from an ultra-hawkish stance to something more neutral. It is worth recalling that the US central bank indicated last week that it will continue to raise borrowing costs to crush inflation and projected an additional 75 bps rate hike by the end of 2023.

It, however, remains to be seen if the NZD/USD pair can capitalize on the move or meets with a fresh supply at higher levels amid looming recession risks. Despite the easing of COVID-19 restrictions in China, investors remain worried about the economic headwinds stemming from a surge in new cases. Apart from this, the protracted Russia-Ukraine war has been fueling concerns about a deeper global economic downturn.

The aforementioned factors make it prudent to wait for follow-through buying before confirming that the NZD/USD pair has formed a bottom and that the recent corrective slide from a multi-month top has run its course. Traders now look forward to the US economic docket, featuring the release of the final Q3 GDP print and the usual Weekly Initial Jobless Claims, for a fresh impetus later during the early North American session.

Technical levels to watch


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