NZD/USD retreats towards 0.6500 as bulls take a breather with eyes on US NFP

• NZD/USD grinds higher after posting the biggest weekly gain since October 2021.
• Risk sentiment improved amid an increase in US consumption, softer inflation data, which in turn weighed on USD.
• Receding fears of inflation can help Kiwi but risks from China, Russia and growth concerns can probe bulls.
• China PMIs, US employment numbers for April appear the week’s key data.

NZD/USD dribbles above 0.6500 after posting the biggest weekly gains in 2022 as traders seek fresh clues to extend the latest run-up. That said, the Kiwi pair eases to 0.6530 during the initial Asian session on Monday.

Underlying the quote’s latest pullback could be the profit-booking moves amid a light calendar and an absence of major macros of late. Also likely to have probed the pair buyers is the caution ahead of this week’s key US employment numbers for April, namely the Nonfarm Payrolls (NFP) and the Unemployment Rate. Also, geopolitical headlines concerning Russia’s aggression in Donbas, as well as covid fears in China, exert additional downside pressure on the NZD/USD prices.

It’s worth noting that the broad US dollar weakness and the Reserve Bank of New Zealand’s (RBNZ) ahead-of-the-curve rate hikes keep the Kiwi pair on the front foot.

The US Dollar Index (DXY) dropped for the second consecutive week to refresh the monthly low at the latest. That said, risk-on mood and mixed US data could be linked to the greenback’s recent weakness. Also weighing on the DXY are the repeated comments from the Fed policymakers suggesting 50 bps rate hikes and the latest FOMC minutes that raised concerns over a softer rate lift after September.

On Friday, the US Personal Consumption Expenditure (PCE) data came in mixed for April, mostly downbeat, as the Core PCE Price Index, the Fed’s preferred measure of inflation, matched 4.9% YoY forecasts versus 5.2% prior. Further, Personal Income rose less than expected but the Personal Spending improved.

The upbeat sentiment could be well witnessed by Wall Street’s run-up, as well as no major change in the US 10-year Treasury yields.

Looking forward, a lack of major data/events may offer a dull start to the key week but macros and risk catalysts may entertain NZD/USD traders.

Technical analysis

NZD/USD buyers need to cross the 0.6570 hurdle comprising the monthly high to keep reins otherwise a pullback towards a fortnight-old rising trend line, around 0.6420 by the press time, appears more likely.