NZD/USD reverses an intraday dip, holds steady around 0.7000 mark

The NZD/USD pair quickly bounced around 15-20 pips from daily lows and was last seen trading with only modest losses, just above the key 0.7000 psychological mark.

The pair struggled to capitalize on the previous day's strong move up to near two-week tops and edged lower during the first half of the trading action on Friday. Investors remain worried about the potential economic fallout from the fast-spreading Delta variant of the coronavirus. This was evident from a generally softer tone around the equity markets, which, in turn, acted as a headwind for the perceived riskier kiwi.

Meanwhile, the risk-off impulse in the markets allowed traders to look past Thursday's dismal US macro releases and extended some support to the safe-haven US dollar. In fact, the first estimate showed that the US economy expanded by 6.5% annualized pace during the second quarter, well short of the 8.5% growth anticipated. Moreover, the US Initial Weekly Jobless Claims and Pending Home Sales data also missed expectations.

This comes on the back of the Fed Chair Jerome Powell's dovish remarks on Wednesday, which held the USD bulls from placing any aggressive bets and helped limit any deeper losses for the NZD/USD pair. During the post-meeting press conference, Powell emphasised that they were some ways away from substantial progress on jobs. Powell further added that it will take a few more meetings before the Fed starts tapering its asset purchases.

Moving ahead, market participants now look forward to the US economic docket – highlighting the release of the Core PCE Price Index. The Fed's preferred inflation gauge might influence the USD price dynamics and provide some impetus to the NZD/USD pair. Traders will further take cues from the broader market risk sentiment to grab some short-term opportunities on the last day of the week.

Technical levels to watch