NZD/USD trims a part of NZ CPI-led gains, still well bid around 0.7000 mark
- NZD/USD gained strong positive traction on Friday in reaction to a stronger NZ CPI report.
- COVID-19 jitters capped any further gains for the perceived riskier kiwi, at least for now.
- A subdued USD price action remained supportive ahead of the US Retail Sales figures.
The NZD/USD pair maintained its bid tone through the early European session, albeit has retreated few pips from daily swing highs. The pair was last seen trading around the key 0.7000 psychological mark, still up over 0.30% for the day.
The pair caught some fresh bids on the last trading day of the week and recovered a major part of the previous day's retracement slide from over one week tops. The kiwi got a strong boost in reaction to stronger New Zealand's consumer inflation report for the second quarter. In fact, the headline CPI smashed market expectations and jumped 1.3% in the quarter ending June from 0.8% previous.
Adding to this, the yearly rate accelerated from 1.5% to 3.3%, marking the fastest pace in nearly a decade. The data firmed up bets for an interest rate hike by the RBNZ at the August policy meeting and triggered a fresh bout of a short-covering move around the NZD/USD pair. This, along with a subdued US dollar demand, remained supportive of the pair's intraday positive momentum.
That said, concerns about the spread of the highly contagious Delta variant of the coronavirus acted as a tailwind for the safe-haven USD and capped gains for the perceived riskier kiwi. The greenback was also supported by a goodish rebound in the US Treasury bond yields and hawkish Fed expectations. This, in turn, kept a lid on any meaningful upside for the NZD/USD pair, at least for now.
The NZD/USD pair failed ahead of the weekly swing highs, around the 0.7040-45 region, which should now act as a key pivotal point for intraday traders. Friday's release of the US Retail Sales data will now be looked upon for a fresh impetus. Apart from this, the US bond yields and the broader market risk sentiment, will influence the USD and produce some trading opportunities around the NZD/USD pair.
Technical levels to watch