NZD/USD hits one-week high, bulls await sustained strength above 0.6700 mark

• NZD/USD reversed an intraday dip and turned positive for the third successive day on Thursday.
• Easing Russia-Ukraine tensions undermined the safe-haven USD and extended some support.
• The lack of follow-through buying warrants caution before placing aggressive bullish bets.

The NZD/USD pair climbed to a one-week high during the early European session, though struggled to capitalize on the move beyond the 0.6700 round-figure mark.

The pair attracted some dip-buying near the 0.6660-0.6655 area on Thursday and turned positive for the third successive day amid the emergence of fresh selling around the US dollar. The initial market reaction to news of shelling out of Ukraine faded rather quickly, which was evident from the modest recovery in the global risk sentiment. This, in turn, drove flows away from traditional safe-haven assets, including the USD, and benefitted the perceived riskier kiwi.

Ukraine denied shelling the separatists' area of Donbas, suggesting that this could be the false flag that Russia is trying to put out in order to set a pretext for an imminent invasion. Moreover, the Russian Ministry of Defense said that around 10 military convoys have left Crimea and released a video showing a logistics unit coming back to its home base after the completion of drills. Adding to this, satellite images showed that Russia has pulled back some equipment from the Ukraine border.

Apart from geopolitical developments, less hawkish FOMC minutes released on Wednesday, showing that policymakers are not set on a particular pace of interest rate hikes, weighed on the buck. This, in turn, assisted the NZD/USD pair to build on this week's goodish rebound from sub-0.6600 levels. That said, the lack of strong follow-through buying warrants some caution for aggressive bullish traders and before positioning for any further near-term appreciating move, at last for now.

Market participants now look forward to the US economic docket, featuring the releases of the Philly Fed Manufacturing Index, Weekly Initial Jobless Claims and housing market data. This, along with the broader market risk sentiment, will influence the USD price dynamics and provide some impetus to the NZD/USD pair.

Technical levels to watch