NZD/USD climbs to two-day tops, back closer to mid-0.7100s

• NZD/USD gained strong follow-through traction on the first day of a new week.
• A subdued USD price action was seen as a key factor that provided a goodish lift.
• Rebounding US bond yields should limit the USD losses and cap gains for the pair.

The NZD/USD pair edged higher through the early European session and climbed to two-day tops, closer to mid-0.7100s in the last hour.

A combination of factors assisted the NZD/USD pair to attract some dip-buying near the 0.7100 mark on the first day of a new week and build on Friday's goodish rebound from near three-week lows. Rising bets for another rate hike by the RBNZ acted as a tailwind for the kiwi and provided a goodish lift to the major amid a subdued US dollar price action.

Last week, the US central bank reiterated that the inflation is transitory, while Fed Chair Jerome Powell said that policymakers were in no rush to hike borrowing costs. This, in turn, kept the USD bulls on the defensive through the early part of the trading action on Monday, though rebounding US Treasury bond yields helped limit any deeper losses.

Apart from this, the cautious market mood further held traders from placing aggressive bearish bets around the safe-haven greenback and might cap gains for the perceived riskier kiwi. This warrants some caution before positioning for any further appreciating move for the NZD/USD pair and confirming that the recent pullback from multi-month tops has run its course.

There isn't any major market-moving economic data due for release from the US on Monday. Hence, the broader market risk sentiment, along with the US bond yields will influence the USD price dynamics and provide some impetus to the NZD/USD pair. Traders might further take cues from Fed Chair Jerome Powell's remarks at an online conference for short-term opportunities.

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