NZD/USD clings to gains near session tops, 0.7000 mark remains in sight

  • NZD/USD attracted some dip-buying near mid-0.6900s on Monday amid renewed USD selling bias.
  • Dovish Fed expectations, sliding US bond yields, the risk-on mood undermined the safe-haven USD.
  • Worries about the fast-spreading Delta variant might act as a headwind and cap gains for the major.

The NZD/USD pair held on to its modest intraday gains through the first half of the European session and was last seen hovering near daily tops, around the 0.6985 region.

Following an early fall to mid-0.6900s, the NZD/USD pair attracted some dip-buying on the first day of a new trading week and stalled Friday’s retracement slide from the 0.7020 region, or two-week tops. A subdued US dollar demand was seen as a key factor that extended some support to the major amid the risk-on impulse in the markets, which tends to benefit the perceived riskier kiwi.

The USD Index drifted back closer to one-month lows amid firming market expectations that the Fed will retain its ultra-lose monetary policy stance for a longer period. This was reinforced by the ongoing decline in the US Treasury bond yields, back closer to multi-month lows. Apart from this, a generally positive risk tone was seen as another factor that undermined the safe-haven USD.

That said, worries that the fast-spreading Delta variant of the coronavirus could derail the global economic recovery might act as a headwind for the NZD/USD pair. Investors might also refrain from placing any aggressive bets, rather prefer to wait on the sidelines ahead of Friday’s release of the closely-watched US monthly jobs report – popularly known as NFP.

In the meantime, Monday’s release of the US ISM Manufacturing PMI, along with the US bond yields might influence the USD price dynamics later during the early North American session. Traders might further take cues from developments surrounding the coronavirus saga and the broader market risk sentiment to grab some short-term opportunities around the NZD/USD pair.

Technical levels to watch

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