NZD/USD bulls move in on key levels of longer-term structure

• NZD/USD bulls in control and eye significant market structure ahead. 
• US dollar could come back into vouge as the US CPI looms. 

NZD/USD is heading into the early Asian shift higher by some 0.24% and has travelled from a low of 0.6627 to a high of 0.6653 on the day so far. The bulls are in charge as they take ut a critical level of daily resistance this week with eyes on a run towards the Feb highs near 0.6680 as illustrated below. 

Meanwhile, all the action was once again centred on bond markets, with the bellwether US 10yr Treasury bond at yet another post-COVID high, as analysts at ANZ Bank highlighted. The US yields are indeed pushing up key technical levels which, if broken, could send the yields over the key psychological threshold of 2% this week. 

The US dollar stands to gain on a correction in the euro as well which is falling under pressure. Sentiment surrounding the European Central Bank was dialled back at the star of the week yet the hawks continue to circle over the Federal Reserve. In the lead up to March's Federal meeting, exceptionally positive US labour data last week, in the form of Nonfarm Payrolls, has put extra focus on this week's Consumer Price Index.

The data could cement expectations on whether the Federal Reserve will raise interest rates by a  25 basis point or a 50 basis point at a March review. Money markets are now pricing in more than a 60% probability of a 50 bps rate hike. As a consequence, the US dollar could be in the running for a significant correction in the forex space with the 96 mark in focus as the DXY index. 

However, ''currency markets aren’t really responding to rising bond yields, and one reason for that is they are rising in unison globally. And being a quiet week locally, there is little to differentiate the Kiwi,'' analysts at ANZ Bank explained. 

Looking ahead, the markets are going to be looking into the US inflation story on the back of the US Consumer Price Index on Thursday.

''There is genuine nervousness ahead of it, with the street forecasting a pick-up to an incredible 7.3%,'' analysts at ANZ Bank said. ''It all speaks to heavy going, so to speak, and as we noted in our NZD Update yesterday, there are crosscurrents aplenty and volatility looks like it might trump directionality in 2022. Hang on to your hats!''

NZD/USD technical analysis

NZD/USD bulls are looking into the Feb. highs on the daily chart that meet with the weekly 38.2% ratio:

A break there opens the prospects of a run to the M-formation's neckline and through a 50% mean reversion.