NZD/USD pares intraday losses to 15-month low, shows some resilience below 0.6600 mark

• A combination of factors dragged NZD/USD to the lowest level since November 2020.
• The post-FOMC strong USD rally got an additional boost from a sell-off in the equities.
• Oversold RSI assisted the pair to rebound a few pips, though any recovery seems elusive.

The NZD/USD pair remained depressed through the first half of the European session, albeit has managed to recover a few pips from sub-0.6600 levels, or a 15-month low touched earlier this Thursday.

A combination of factors dragged the NZD/USD pair lower for the sixth successive day on Thursday and led to an extension of the recent bearish trajectory witnessed over the past two weeks or so. The post-FOMC US dollar rally remained uninterrupted, which, along with the risk-off impulse in the markets drove flows away from the perceived riskier kiwi.

The Fed on Wednesday reaffirmed market expectations for an eventual lift-off in March, which, in turn, pushed the yield on the 2-year US government bond to the highest level since January 2020. Moreover, the yield on the benchmark 10-year note shot back to the 1.85% threshold and lifted the key USD Index to the highest level since mid-December.

Meanwhile, concerns about a faster policy tightening by the Fed, along with political tensions between Russia and Ukraine, took its toll on the global risk sentiment. This was evident from a slump in the equity markets, which further benefitted the greenback's relative safe-haven status and exerted additional downward pressure on the NZD/USD pair.

That said, oversold RSI (14) on the daily chart assisted the pair to find some support and rebound over 30 pips from the daily swing low, around the 0.6595 region. That said, any meaningful recovery seems elusive amid sustained USD buying. Hence, any further move up might still be seen as a selling opportunity and run the risk of fizzling out quickly.

Market participants now look forward to the US economic releases – Advance Q4 GDP, Durable Goods Orders, Weekly Jobless Claims and Pending Home Sales. This, along with the US bond yields and the broader market risk sentiment, will influence the USD price dynamics and produce some short-term trading opportunities around the NZD/USD pair.

Technical levels to watch