The NZD/USD pair successfully defends the 0.6300 level and garners buying interest during Tuesday’s Asian session, putting a pause on its retracement slide from levels slightly above the 0.6400 mark or its highest point since early February last week.
Presently, spot prices trade slightly below the mid-0.6200s, showing a gain of nearly 0.30% for the day. The pair finds support from a modest decline in the US Dollar (USD).
The USD Index (DXY), which tracks the Greenback against a basket of currencies, remains within close range of a 15-month low recorded last Friday. This situation continues due to mounting speculation of a less hawkish stance from the Federal Reserve (Fed).
Investors are increasingly convinced that the US central bank is approaching the conclusion of its policy tightening cycle, thereby pricing out the possibility of further interest rate hikes this year, aside from the expected 25 bps lift-off in July. Consequently, US Treasury bond yields have pulled back recently, keeping the USD bulls on the back foot.
In addition to this, the prevailing positive risk sentiment also weighs on the safe-haven US currency, providing some support to the risk-sensitive New Zealand Dollar (Kiwi).
However, concerns regarding a global economic slowdown intensify with the release of weaker-than-expected Chinese GDP figures on Monday, which could limit market optimism.
Moreover, expectations that the Fed may adhere to its projected 50 bps rate hike for the year could discourage traders from taking aggressive bearish positions against the USD. Consequently, any significant upward movement for the NZD/USD pair is likely to be constrained.
Looking ahead, market participants eagerly await the US economic calendar, which includes the release of monthly Retail Sales and Industrial Production figures during the early North American session.
These data, along with US bond yields and overall market sentiment, are anticipated to impact the direction of the USD and provide impetus to the NZD/USD pair.
Given the aforementioned fundamental backdrop, it is advisable to await confirmation of sustained buying momentum before considering fresh bullish positions following the recent retreat from multi-month highs.
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