NZD/USD struggles for direction, flat lined above mid-0.7000s ahead of NFP
- Some repositioning trade ahead of the NFP allowed NZD/USD to reverse a modest intraday slide.
- A combination of factors continued underpinning the USD and acted as a headwind for the major.
The NZD/USD pair reversed modest intraday losses and was last seen trading in the neutral territory, just above mid-0.7000s heading into the North American session.
Trading activity on the last day of the week, so far, has been subdued as investors preferred to wait on the sidelines ahead of the US monthly jobs report, due for release in a while from now. In the meantime, a combination of factors acted as a headwind for the NZD/USD and kept a lid on any meaningful upside.
Worries that the fast-spreading Delta variant of the coronavirus could derail the global economic recovery weighed on investors' sentiment and undermined the perceived riskier kiwi. Conversely, the US dollar was supported by Fed Vice Chair Richard Clarida's hawkish comments and a strong move up in the US Treasury bond yields.
Clarida noted that conditions for an interest rate hike could be met in late 2022 and also signalled a move to taper bond buying later this year or early 2022. This forced investors to bring forward the likely timing of a policy tightening, which, in turn, pushed the yield on the benchmark 10-year US government bond back above the 1.25% threshold.
Meanwhile, the NZD/USD pair's intraday bounce of around 15 pips lacked any obvious catalyst and could be solely attributed to some repositioning trade ahead of the NFP report. The data will influence expectations about the next policy move by the Fed, which will drive the USD in the near term and provide a fresh directional impetus to the NZD/USD pair.
Technical levels to watch