- NZD/USD gained positive traction for the fifth consecutive session on Wednesday.
- The kiwi got a lift after RBNZ maintained status-quo and led interest rates unchanged.
- Retreating US bond yields undermined the USD and provided an additional boost.
The NZD/USD pair consolidated the post-RBNZ strength to fresh 34-month tops and was seen oscillating in a range around the 0.7370-75 region.
The pair built on its recent positive momentum and gained some follow-through traction for the fifth consecutive session on Wednesday. The kiwi got a goodish lift after the Reserve Bank of New Zealand(RBNZ), as was expected, held its official cash rate at a record low of 0.25%
The RBNZ also retained its large scale asset purchase (LSAP) programme at NZ$100 billion and showed no rush to remove monetary stimulus. In the accompanying policy statement, the central bank said that monetary stimulus remains necessary to meet its inflation and employment targets.
Apart from this, the emergence of some fresh selling around the US dollar provided an additional boost to the NZD/USD pair. The greenback was pressured by a modest pullback in the US Treasury bond yields in reaction to the dovish sounding comments by the Fed Chair Jerome Powell on Tuesday.
During the first day of his semi-annual testimony before the Congress, Powell reiterated that interest rates will remain low and the Fed will keep buying bonds to support the US economic recovery. The US bond yields were further dragged by a softer risk tone surrounding the equity markets.
However, slightly overbought conditions on intraday charts held traders from placing fresh bullish bets and kept a lid on any further gains for the NZD/USD pair. That said, the near-term bias remains tilted firmly in favour of bullish traders and supports prospects for additional gains.
Market participants now look forward to Powell's second day of congressional testimony, which will play a key role in influencing the USD price dynamics. This, along with the broader market risk sentiment, might produce some short-term trading opportunities around the NZD/USD pair.
Technical levels to watch
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