NZD/USD struggles below 0.7000 on mixed concerns over Ukraine, inflation

• NZD/USD fades recent recovery following a volatile day with the first negative close in three.
• NATO criticized Russian invasion and braced for Ukraine help, G7 showed diplomacy while US pushed to remove Moscow from G20.
• Yields stayed firmer even as US data came in mixed, Jobless Claims favored equities.
• Light calendar keeps focus on the risk catalysts for fresh impulse.

NZD/USD dribbles around 0.6960 during the early Friday morning in Asia, after an active Thursday that snapped a two-day uptrend. The market sentiment remains mixed with a rebound in equities failing to justify firmer yields amid indecision over the key risk catalysts surrounding Ukraine and inflation.

US President Joe Biden’s European visit offered multiple macros suggesting the Western readiness for more sanctions but the bloc’s leaders and other G7 members showed mixed reactions. That said, US President Biden pushed for removing Russia from the Group of 20 (G20) whereas the North Atlantic Treaty Organization (NATO) members criticized the Russian invasion of Ukraine, as well as China’s friendly relations with Russia. It’s worth noting that the Russian Foreign Ministry denounced NATO’s artillery help to Ukraine and turned down the US decision to levy sanctions on gold transactions with the Russian central bank.

Elsewhere, fresh fears of covid in China and Europe, with the BA.2 variant tightening grip in the bloc, also weigh on the NZD/USD prices.

On the positive side, a slump in the Weekly Jobless Claims to the levels not seen since 1969 joined firmer US Markit PMIs for February to favor the market’s optimism. However, downbeat prints of US Durable Goods Orders and fears of inflation weighed on the sentiment.

Additionally defending NZD/USD prices are the comments from ANZ saying, “Yesterday the IMF published its regular Article IV report on the NZ economy. It concluded that ‘significant increases in the official cash rate in the near term are appropriate,’ but warned that a weakening global economy and the withdrawal of monetary and fiscal stimulus would contribute to moderating growth, predicting 2.7% in 2022 (ANZ: 2.1%).”

Amid these plays, Wall Street benchmarks ended Thursday on the positive side whereas the US 10-year Treasury yields rose 3.5% around 2.37% by the end of Thursday’s North American session.

Moving on, second-tier US data may entertain NZD/USD traders but headlines concerning Russia and Inflation will be crucial to watch for fresh impulse.

Technical analysis

Although overbought RSI triggered the mid-week pullback from 0.6989, the 61.8% Fibonacci retracement (Fibo.) of October 2021 to January 2022 downside and the 200-DMA, respectively around 0.6950 and 0.6910, limit the short-term downside of the NZD/USD prices.