- NZD/USD struggled to capitalize on its modest intraday uptick to the 0.6820 region.
- Stagflation fears, worsening Ukraine crisis underpinned the USD and capped gains.
- A convincing break below the 0.6800 mark will set the stage for a further decline.
The NZD/USD pair surrendered its modest intraday gains and was last seen flirting with the daily low, around the 0.6800 mark heading into the European session.
Signs of stability in the equity markets undermined the safe-haven US dollar during the early part of the trading on Wednesday and assisted the NZD/USD pair to gain some positive traction. The uptick, however, lacked bullish conviction and ran out of steam near the 0.6820 region amid stagflation fears.
In the latest developments, US President Joe Biden on Tuesday imposed an immediate ban on Russian oil and other energy imports. The move was matched by Britain, announcing that it would phase out the import of Russian oil by the end of 2022 and pushed the black liquid to the highest level since 2008.
The recent monster gains in commodity prices following Russia's invasion of Ukraine has been fueling concerns about the risk of a major inflationary shock. This, along with the rapidly deteriorating global economic outlook, weighed on the sentiment and capped gains for the perceived riskier kiwi.
The fundamental backdrop favours the USD bulls amid a relatively thin US economic docket on Wednesday. This, in turn, supports prospects for an extension of the NZD/USD pair's rejection slide from the 200-day SMA, around the 0.6925 area, or the highest level since November 2021 touched earlier this week.
Nevertheless, the market focus will remain glued to the incoming headlines surrounding the Russia-Ukraine saga. This, along with the broader market risk sentiment, will drive demand for the safe-haven USD and allow traders to grab some short-term opportunities around the NZD/USD pair.