NZD/USD climbs to fresh multi-week high around mid-0.6200s, beyond 200-day SMA

• NZD/USD continues scaling higher on Friday and climbs to a nearly four-week high.
• The USD remains depressed amid dovish Fed expectations and lends some support.
• A positive risk tone further undermines the buck and benefits the risk-sensitive Kiwi.

The NZD/USD pair prolongs its recent upward trajectory witnessed since the beginning of the current month and climbs to over a three-week high on Friday. The pair maintains its bid tone, just below mid-0.6200s heading into the European session and now seems to have found acceptance above a technically significant 200-day Simple Moving Average (SMA).

The US Dollar (USD) continues with its struggle to register any meaningful recovery and remains depressed near a five-week low, which, in turn, is seen acting as a tailwind for the NZD/USD pair. Despite the Federal Reserve's (Fed) hawkish signal that borrowing costs may still need to rise by as much as 50 bps by the end of this year, investors seem convinced that the US central bank is getting closer to the peak of its policy tightening cycle. Moreover, Thursday's rather unimpressive US macro data raised questions over how much headroom the US central bank has to keep raising rates., which continues to undermine the buck.

Apart from this, a generally positive tone around the equity markets is seen as another factor weighing on the safe-haven Greenback and benefitting the risk-sensitive Kiwi. That said, worries about a global economic downturn, particularly in China, might keep a lid on any optimism. Furthermore, a modest uptick in the US Treasury bond yields could limit the USD losses. This, along with the Reserve Bank of New Zealand's (RBNZ) explicit signal that it was done with its most aggressive hiking cycle since 1999 and a technical recession in New Zealand, might hold back bulls from placing fresh bets around the NZD/USD pair.

Nevertheless, spot prices remain on track to register strong weekly gains and end in the green for the third successive week. In the absence of any relevant market-moving economic releases from the US, traders on Friday will take cues from Governor Christopher Waller's public appearance later during the early North American session. This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to the NZD/USD pair. Apart from this, the broader risk sentiment might further contribute to producing short-term trading opportunities on the last day of the week.

Technical levels to watch