NZDUSD eases from two-month peak, consolidates the post-US CPI rally above 0.6000 mark

• NZDUSD reverses an intraday dip and climbs to a nearly two-month high on Friday.
• The USD consolidates the post-US CPI slump and continues to lend some support.
• The prevalent risk-on mood provides an additional boost to the risk-sensitive Kiwi.
• The lack of follow-through buying beyond the 100 DMA warrants caution for bulls.

The NZDUSD pair attracts some dip-buying near the 0.5985 region on Friday and hits a nearly two-month high during the early European session. The pair is currently placed just below mid-0.6000s and is now looking to build on the momentum further beyond the 100-day SMA.

The US Dollar struggles to register any meaningful recovery and languishes near its lowest level since August 26, which, in turn, offers some support to the NZDUSD pair. The softer US consumer inflation figures released on Thursday reaffirmed market expectations that the Federal Reserve will slow the pace of its policy tightening. This was evident from a steep decline in the US Treasury bond yields and continues to weigh on the greenback.

The prospects for smaller interest rate hikes by the US central bank boosted investors' appetite for riskier assets. This is evident from a sharp rise in the equity markets, which is could be cited as another factor weighing on the safe-haven buck and acting as a tailwind for the risk-sensitive Kiwi. That said, worries about headwinds stemming from China's economically disruptive zero-COVID policy might keep a lid on the optimism.

Moreover, the markets are still pricing in a greater chance of a 50 bps Fed rate hike move at the next policy meeting in December. This, in turn, could help ease the bearish pressure surrounding the buck and cap the upside for the NZDUSD pair, at least for now. Moreover, the lack of strong follow-through buying warrants some caution for bullish traders. Nevertheless, spot prices remain on track to register gains for the fourth successive week. 

Market participants now look forward to the US economic docket, highlighting the release of the Preliminary Michigan US Consumer Sentiment Index later during the early North American session. This, along with the US bond yields and the broader market risk sentiment, will influence the USD price dynamics and provide some impetus to the NZDUSD pair.

Technical levels to watch