NZD/USD fails ahead of 0.6300 mark, pares intraday gains to multi-week high

The NZD/USD pair gains positive traction for the second successive day and touched its highest level since February 16 on Friday, albeit faces rejection near the 0.6300 mark. Spot prices trade around the 0.6270-0.6275 region during the early European session and now seem to have found acceptance above a technically significant 200-day Simple Moving Average (SMA).

The prevalent risk-on environment - as depicted by a generally positive tone around the equity markets - turns out to be a key factor lending support to the NZD/USD pair. Against the backdrop of easing fears of a full-blown banking crisis, hopes for a strong economic recovery in China boost investors' confidence and benefit the risk-sensitive Kiwi. In fact, the official Chinese PMI data showed that business activity in the services sector grew at its fastest pace in 12 years in March. Meanwhile, the growth in the manufacturing sector moderated a bit during the reported month, albeit at a smaller-than-expected pace.

The US Dollar (USD), on the other hand, struggles to gain any traction amid the uncertainty over the Federal Reserve's rate-hike path, which provides an additional lift to the NZD/USD pair. It is worth recalling that the Fed had signalled recently that it might soon pause the rate-hiking cycle in the wake of the turmoil in the banking sector. That said, hopes that a widespread banking crisis might have been averted fueled speculations that the US central bank might move back to its inflation-fighting rate hikes. Furthermore, three Fed officials on Thursday backed the case for more rate increases to lower high levels of inflation.

This, in turn, is holding back traders from placing aggressive bearish bets around the USD and acting as a headwind for the NZD/USD pair, at least for the time being. Investors also seem reluctant and prefer to move on the sidelines ahead of the release of the US Core PCE Price Index, the Fed's preferred inflation gauge later during the early North American session. The data will play a key role in influencing expectations about the next policy move. This, in turn, should drive the USD demand in the near term and help determine the next leg of a directional move for the major.

Technical levels to watch