- NZD/USD edged lower on Thursday and snapped three consecutive days of the winning streak.
- The recent surge in the US bond yields underpinned the USD and exerted pressure on the pair.
- The risk-on mood helped limit losses for the perceived riskier kiwi ahead of the US macro data.
The NZD/USD pair remained on the defensive through the early European session and was last seen hovering near the lower boundary of its intraday trading range, just above mid-0.6900s.
The pair witnessed a modest pullback from the 50-day SMA hurdle, around the 0.6980 region and for now, seems to have stalled this week's strong recovery from the 0.6800 neighbourhood, or YTD lows. This marked the first day of a negative move in the previous four sessions and was exclusively sponsored by a goodish pickup in the US dollar demand.
Investors seem convinced that the Fed might still begin tapering its massive asset purchases in 2021 amid the optimism the Delta variant of the coronavirus won't derail the economic recovery. The US Food and Drug Administration (FDA) granted full approval to the Pfizer/BioNTech COVID-19 vaccine and raised hopes that inoculations in the US could accelerate.
Adding to this, the top US infectious disease expert, Dr Anthony Fauci, said that COVID-19 could be under control by early next year and further boosted investors' confidence. The market expectations were reinforced by the recent strong positive move in the US Treasury bond yields, which continued acting as a tailwind for the greenback.
That said, the underlying bullish sentiment in the financial markets capped any further upside for the safe-haven USD and extended some support to the perceived riskier kiwi. Apart from this, investors also seemed reluctant to place any aggressive bets ahead of Fed Chair Jerome Powell's speech at the Jackson Hole Symposium.
In the meantime, traders might take cues from Thursday's release of the Prelim US Q2 GDP print (second estimate) and the usual Weekly Jobless Claims. This, along with the US bond yields and broader market risk sentiment, might influence the USD price dynamics and produce some short-term trading opportunities around the NZD/USD pair.