NZD/USD braces to 0.6800 amid higher US T-bond yields

The New Zealand dollar edges slightly up during the New York session, clinging to the 0.6800 figure at the time of writing. The market sentiment is mixed, though the NZD has risen in tandem with other risk-sensitive currencies like the AUD and the GBP against the greenback, despite higher US Treasury yields, with the 10-year benchmark note at 1.66%, up to three basis points in the day.

In the meantime, an absent New Zealand economic docket, spurred by holidays in New Zealand, kept the NZD/USD pair leaning on US economic data. Meanwhile, the US economic docket featured the US Institute for Supply Management (ISM) Manufacturing PMI for December in its final reading, which came at 58.7 vs. 60 estimated by analysts, worse than expected.

Despite being poor data, the decline came at the expense of “sharp declines in delivery times and prices were key drivers of the decline and signal at least some welcome improvement in terms of diminishing inflationary pressure,” as commented by Wells Fargo analysts. Further, the analysts noted that “the biggest message from today’s report is that the prices paid component plunged 14.2 points in December.”

Therefore, once the data crossed the wires, the NZD/USD spiked to 0.6820, facing strong selling pressure and returning to the 0.6800 figure almost immediately. Rallies in the NZD/USD could be viewed as opportunities for USD bulls to position themselves as long as US T-bond yields keep rising.

NZD/USD Price Forecast: Technical outlook

The NZD/USD 1-hour chart shows that the pair has a neutral-bearish bias, as the hourly simple moving averages (SMAs) remain above the spot price.

During the New York session, the NZD/USD upward move faced strong resistance around the 0.6820 area, retreating to the 0.6800-10 area, as NZD bulls would not be able to sustain the trend, despite poor US economic data, with the ISM Manufacturing PMI for December, falling short of expectations.

To the upside, NZD/USD’s first resistance would be the R1 daily pivot at 0.6836. A decisive break of the latter would expose the January 3 daily high at 0.6856, followed by the R2 daily pivot at 0.6888.

On the other hand, failure to break the abovementioned would open the door for USD bulls to enter fresh bets vs. the NZD, as the bond yield differential shrank as Federal Reserve tightening expectations have increased since December 2021 last monetary policy meeting.

The first support would be 0.6800. A breach of that level would expose the January 4 daily low at 0.6764, followed by the December 22 swing low at 0.6740.