- NZD/USD gained strong positive traction on Friday in reaction to a stronger NZ CPI report.
- A subdued USD demand remained supportive of the move up amid a positive risk tone.
- Rebounding US bond yields, upbeat US Retail Sales data did little to impress the USD bulls.
- COVID-19 jitters kept a lid on any runaway rally for the major, at least for the time being.
The NZD/USD pair extended its sideways consolidative price action through the early North American session and remained confined in a range just above the key 0.7000 psychological mark.
Following the previous day's sharp pullback from the 0.7045 region, or over one-week tops, the NZD/USD pair regained positive traction on the last trading day of the week. Stronger New Zealand consumer inflation report for the second quarter, along with a subdued US dollar demand provided a goodish lift to the major.
In fact, the headline NZ CPI recorded the fasted rise in nearly a decade and accelerated to 3.3% in the quarter ending June. Against the backdrop of a hawkish surprise by the Reserve Bank of New Zealand earlier this week, the data further firmed up bets for an interest rate hike at the August monetary policy meeting.
On the other hand, a generally positive tone around the equity markets undermined the safe-haven US dollar and extended some additional support to the perceived riskier kiwi. The USD bulls shrugged off a strong pickup in the US Treasury bond yields and also seemed unimpressed by upbeat US monthly Retail Sales figures.
The US Census Bureau reported that the total value of sales at the retail level increased by 0.6% in June, surpassing consensus estimates pointing to a 0.4% decline. Excluding autos, core retail sales also smashed expectations and jumped 1.3% MoM during the reported month, though failed to provide any impetus to the buck.
A downward revision of the previous month's already weaker readings seemed to be the only factor that held the USD bulls from placing any bets. Nevertheless, the data did little to dampen expectations that the Fed will tighten its policy sooner. This, in turn, benefitted the USD and capped the gains for the NZD/USD pair.
Meanwhile, investors remain concerned that the spread of the highly contagious Delta variant of the coronavirus could derail the global economic recovery. This was seen as another factor that contributed to keeping a lid on any meaningful upside for the NZD/USD pair, warranting caution for aggressive bullish traders.
Technical levels to watch
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