NZD/USD slides to fresh session lows, 0.7000 mark back in sight

The NZD/USD pair edged lower heading into the European session and dropped to fresh daily lows, around the 0.7020 region in the last hour.

The pair struggled to capitalize on its weekly gains recorded over the past two trading sessions and met with some fresh supply on Thursday amid a modest US dollar uptick. The fact that Fed officials have started to guide the market towards early tapering and higher interest rates as soon as 2022 helped limit the post-CPI USD profit-taking. This, along with a generally softer tone around the equity markets, further collaborated to drive flows away from the perceived riskier kiwi.

Kansas City Fed President Esther George said on Wednesday that the time had come to end the central bank’s bond-buying program. Adding to this, Dallas Fed President Rob Kaplan said that he will press his colleagues to announce a plan to taper bond purchases at the next meeting in late September. This comes on the back of hawkish comments by Atlanta Fed President Raphael Bostic and Boston Fed President Eric Rosengren earlier this week, which continued acting as a tailwind for the greenback.

That said, some follow-through decline in the US Treasury bond yields might hold the USD bulls from placing any aggressive bets and lend some support to the NZD/USD pair. This, in turn, warrants some caution for bearish traders and positioning for any further depreciating move. Market participants now look forward to the US economic docket, featuring the releases of the Producer Price Index (PPI) and Initial Weekly Jobless Claims. Apart from this, the US bond yields and the market risk sentiment might influence the USD price dynamics, producing some trading opportunities around the major.

Technical levels to watch