NZD/USD bulls aim for a test of 0.67 the figure and weekly lows

• The NZD bulls have moved in on old weekly lows. 
• US CPI will be eyed for the next potential catalyst. 

At 0.6690, NZD/USD is higher by 0.62% on the day as the North American session winds down and traders prepare for Thursday's key US Consumer Price Index event. The kiwi has travelled from a low of 0.6641 and reached a high of 0.6697 in mid-day US trade. 

As analysts at ANZ Bank pointed out, ''the strong rally in the AUD overnight helped lift the Kiwi, with the former buoyed by gains in metals and a bounce in generalised market risk appetite.'' However, the analysts argued that ''in the context of moves seen last year, the NZD’s rally of around a cent off last Friday’s lows was pretty tame.''

''Bond yields are rising in unison globally, and that’s causing FX volatility rather than directionality, with the markets unsure whether it likes rate hikes (they should dampen inflation) or don’t (they might slow growth and weigh on asset prices).''

There has been a void of domestic drivers for the kiwi and the focus for this week stays with the US and global inflation story as a whole. As the old adage goes, when the US sneezes, the rest of the world catches a cold. Therefore, Thursday's CPI data could be one that moves the needle in forex if it surprises one way or the other.  

''US CPI data tonight is important and will help settle the debate as to whether the Fed will lift off with a 25bp or 50bp hike. But it’s not clear the latter would actually benefit the USD,'' the analysts at ANZ Bank argued. 

However, given how the greenback has been weighed by US rates taking a breather, This may be the calm before the storm. ''If those readings come in hot, it could be the trigger for the next leg higher in U.S. yields and likely push the 10-year above 2% for the first time since August 2019,'' analysts at Brown Brothers Harriman warned. ''Fed tightening expectations would also pick up and likely push the short end of the US curve higher, which would support the dollar.''

NZD/USD technical analysis

NZD/USD bulls are taking charge in a significant correction that is moving on old lows near 0.67 teh figure and towards the neckline of the M-formation near 0.6733. This resides between the 50% mean reversion and the 61.8% ratio.