NZD/USD sticks to strong intraday gains above 0.6200 mark, lacks follow-through
- NZD/USD regains strong positive traction on Tuesday amid broad-based USD weakness.
- The upbeat Chinese GDP print lifts market sentiment and weighs on the safe-haven buck.
- Bets for more Fed rate hikes and elevated US bond yields should lend support to the USD.
The NZD/USD pair attracts fresh buyers near the 0.6170-0.6160 horizontal support on Tuesday and maintains its strong bid tone through the early North American session. The pair is currently placed around the 0.6200 mark, just a few pips below the daily top, and for now, seems to have snapped a two-day losing streak amid broad-based US Dollar (USD) weakness.
In fact, the USD Index, which tracks the Greenback against a basket of currencies, stalls its recent recovery move from a one-year low touched last week amid a generally positive tone around the equity markets. The stronger-than-expected Chinese Q1 GDP print helps ease fears about a deeper economic downturn and boosts investors' confidence, which, in turn, is seen weighing on the safe-haven buck and benefitting the risk-sensitive Kiwi.
The downside for the USD, however, seems limited amid speculations that the Federal Reserve (Fed) will continue lifting interest rates. In fact, the current market pricing indicates a greater chance of another 25 bps lift-off at the next FOMC meeting in May. The bets were lifted by the latest hawkish comments by St. Louis Fed President James Bullard, reiterating that interest rates will need to continue to rise in the absence of clear progress on inflation.
The prospects for further policy tightening by the Fed remain supportive of elevated US Treasury bond yields, which favours the USD bulls and might keep a lid on any meaningful upside for the NZD/USD pair, at least for the time being. Hence, it will be prudent to wait for strong follow-through buying before confirming that the downfall witnessed over the past two sessions has run its course and before positioning for any further appreciating move.
Technical levels to watch