NZD/USD hits fresh monthly high, eyes a move beyond 0.6800 amid positive risk tone

• A combination of supporting factors pushed NZD/USD to over a one-month high on Wednesday.
• A more hawkish RBNZ stance, the risk-on mood provided strong lift to the perceived riskier kiwi.
• Modest USD weakness remained supportive of the move, though overbought RSI might cap gains.

The NZD/USD pair maintained its strong bid tone heading into the North American session and was last seen trading just below the 0.6800 mark, or over a one-month high.

The pair gained strong positive traction on Wednesday after 
the Reserve Bank of New Zealand (RBNZ) hiked interest rates, as expected, and indicated that more tightening could be necessary. In the accompanying policy statement, the RBNZ noted that the decision between a 25bp and 50bp hike was finely balanced and also increased the official cash rate (OCR) peak forecast.

In fact, New Zealand's central bank projected that the cash rate would reach 2.2% by the end of 2022 and 3.35% in the last quarter of 2023, 0.75% higher than its November forecast of 2.6%. This, along with the risk-on impulse in the markets, provided a goodish lift to the perceived riskier kiwi and pushed the NZD/USD pair higher for the seventh successive day.

The intraday positive momentum seemed unaffected by the risk of an imminent Russian invasion of Ukraine, instead took cues from the emergence of fresh US dollar selling. The upbeat mood around the global equity markets undermined the safe-haven greenback, which, so far, has failed to draw any support from a fresh leg up in the US Treasury bond yields.

Apart from the aforementioned factors, sustained strength beyond the previous monthly high, around the 0.6730-0.6735 region, prompted technical buying and contributed to the strong bid tone. It, however, remains to be seen if bulls are able to capitalize on the move or opt to take some profits off the table amid slightly overbought RSI (14) on hourly charts.

There isn't any major market-moving economic data due for release from the US, though developments surrounding the Russia-Ukraine saga might influence the USD price dynamics. Traders will further take cues from the broader market risk sentiment to grab some short-term opportunities around the NZD/USD pair.

Technical levels to watch