NZD/USD remains below mid-0.6100s, seems vulnerable near one-month low

• NZD/USD rebounds from over a one-month low, though the uptick lacks follow-through.
• A further slide in the US bond yields weighs on the USD and lends support to the major.
• Bets for more Fed rate hikes, a weaker risk tone limit the USD losses and cap the pair.

The NZD/USD pair stages a modest intraday bounce from the 0.6125 area, or its lowest level since March 13 touched earlier this Monday, albeit struggles to capitalize on the move. Spot prices trade with a mild positive bias, around the 0.6140 region during the first half of the European session and for now, seem to have snapped a three-day losing streak.

A further decline in the US Treasury bond yields continues to exert some downward pressure on the US Dollar (USD), which, in turn, is seen as a key factor lending support to the NZD/USD pair. That said, the prospects for further policy tightening by the Federal Reserve (Fed), which, along with a weaker risk tone, help limit the downside for the safe-haven buck and keep a lid on any meaningful upside for the risk-sensitive Kiwi.

The markets seem convinced that the Fed will continue raising interest rates to curb inflation and have fully priced in a 25 bps lift-off at the next FOMC policy meeting in May. Moreover, the Fed funds future indicates a smaller chance of another rate hike in June. The bets were lifted by the recent hawkish comments by several Fed officials and the incoming US macro data, which suggested that the world's largest economy remained resilient.

Meanwhile, worries about economic headwinds stemming from rising borrowing costs temper investors' appetite for riskier assets. This, in turn, could drive some haven flows towards the Greenback and contribute to capping gains for the NZD/USD pair. In the absence of any relevant market-moving economic data, the US bond yields, along with the broader risk sentiment, will influence the USD and provide some impetus to the major.

Market participants now look to this week's rather busy US economic docket, featuring the release of the Conference Board's Consumer Confidence Index on Tuesday, followed by Durable Goods Orders on Wednesday. The focus, however, will remain glued to the Advance US Q1 GDP report on Thursday and the Core PCE Price Index - the Fed's preferred inflation gauge - on Friday, which should determine the near-term trajectory for the NZD/USD pair.

Technical levels to watch