NZD/USD bulls return to the table at close

  • NZD/USD bulls pull back and watch the neckline of the weekly M formation near 0.6930.
  • The US dollar and US yields are the driving forces mid-week.

NZD/USD was under pressure on Tuesday but rose in the closing hours of the New York session, trading at 0.6773 after climbing from a low of 0.6752. The pair had been as high as 0.6808 at the start of the day before an all-powerful surge in the greenback.

benchmark U.S. Treasury yields hit two-year highs and major stock indices fell more than 1% on Tuesday as traders braced for the Federal Reserve to be more aggressive in tightening monetary policy to fight against inflation.

The US dollar hit a six-day high after Treasury yields jumped. The US 10-year yield also hit a two-year high of 1.866% overnight. In line with treasury yields, the dollar strengthened against a basket of currencies, hitting a 1-week high at 95.83 DXY.

As for risk appetite, the Dow Jones Industrial Average fell more than 1.9% to 35,262 and the S&P 500 fell 1.9% to 4,569.82. The Nasdaq Composite fell 2.31% to 15,238. All sectors were in the red as volatility remained high at the start of the year, weighing on the best performing currencies and the dollar bloc.

”While the AUD and NZD have been the two worst performing G10 currencies year-to-date, they have outperformed the EUR and CAD overnight. Overall, this is a picture of volatility, and while not extreme, this theme is likely to continue through the year as global central banks seek to tighten and rein in liquidity by cash,’ analysts at ANZ Bank said.

”Yesterday’s NZIER QSBO data fueled the debate over how much further tightening could be applied here. The survey highlighted a tight labor market and continued inflationary pressures, but in a world where everyone else is tightening equally, that might not help the NZD.

NZD/USD technical analysis

The bird is going through what could be a period of accumulation based on the M formation of the weekly chart and the neck line at 0.6930 as a target:

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