NZD/USD retreats from weekly top near 0.6700 on sour sentiment

• NZD/USD snaps two-day uptrend as risk appetite roils on headlines claiming Ukraine violated ceasefire.
• US T-bond yields slumped, DXY rallied and gold turned positive as traders rushed to risk-safety on the news.
• Ex-RBNZ officials raised concerns over 0.75% rate-hike ahead of next week’s monetary policy meeting.
• Fedspeak, second-tier US data could entertain traders but geopolitics are the key.

NZD/USD licks its wounds around 0.6680, down 0.11% intraday while posting the first daily loss in three heading into Thursday’s European session.

In doing so, the pair consolidates the 40-pips drop following the news from Russia that Ukraine fired mortar shells and grenades on Luhansk People's Republic (LPR) locations, per Sputnik. The latest corrective pullback could be linked to the market’s doubt over the news due to the lack of confirmations from other sources.

The same happened when Moscow announced rolling back of some troops from borders but the West, Ukraine and some of the European diplomats dashed optimism.

Elsewhere, the US-China trade tussles renew amid Beijing’s failures to respect Phase 1 deal targets. The Wall Street Journal said, “To the extent that China’s unfair, nonmarket and distortive policies and practices persist, the United States is prepared to use domestic trade tools strategically as needed in order to achieve a more level playing field with China for US workers and businesses.” 

Earlier in the day, a former Reserve Bank of New Zealand (RBNZ) Chairman and Chief Economist, said In an MNI interview on Thursday that he believes the central bank should hike the benchmark rate by 75-basis points (bps) at its next week’s policy meeting.

It should be noted that the policymakers refrain from hawkish performance in the next Fed meeting, per Wednesday’s Federal Open Market Committee (FOMC) Minutes join upbeat US data to also weigh on the market sentiment and favor the USD.

Amid these plays, stock futures print losses and the US Treasury yields drop whereas the traditional safe-havens like gold benefit from the rush to risk-safety.

That said, NZD/USD traders will pay close attention to the risk-related headlines for more updates while the second-tier US economics, mainly the housing market numbers, jobless claims and Philadelphia Fed Manufacturing Survey, will decorate the calendar.

Technical analysis

The previous support line from January 28 restricts the immediate upside of NZD/USD prices around 0.6700, a break of which will direct the quote towards the 50-DMA level near 0.6735.

Meanwhile, 21-DMA and the latest swing low, respectively around 0.6650 and 0.6590, limit short-term declines of the Kiwi pair.