NZD/USD climbs back above 0.6700 mark, lacks bullish conviction amid conflict in Ukraine

• NZD/USD witnessed a bearish gap opening on Monday, albeit lacking follow-through selling.
• The worsening situation in Ukraine lifted the safe-haven USD and exerted downward pressure.
• Signs of stability in the markets helped the perceived riskier kiwi to attract some dip-buying.

The NZD/USD pair climbed back above the 0.6700 round-figure mark during the early European session and refreshed its daily high in the last hour.

The pair opened with a big bearish gap on the first day of a new week in reaction to the latest developments surrounding the Ukraine crisis. President Vladimir Putin upped the ante and put nuclear-armed forces on high alert on Sunday. This, in turn, boosted demand for the traditional safe-haven US dollar and weighed heavily on the perceived riskier kiwi.

The early decline, however, was quickly bought into near the 0.6670 area amid modest USD pullback from the daily high. The market sentiment stabilized a bit after the Russian negotiator said that they are interested to reach an agreement with Ukraine as soon as possible. This, along with sliding US Treasury bond yields, acted as a headwind for the greenback.

The worsening situation in Ukraine now seems to have dampened prospects for a more aggressive policy response by the Fed to contain stubbornly high inflation. Apart from this, the global flight to safety triggered a steep decline in the US bond yields, which kept a lid on any further gains for the buck and extended some support to the NZD/USD pair.

The attempted recovery, however, lacked bullish conviction as the focus remains on the Ukraine-Russia dialogue, which will start on Monday at the Belarusian-Ukrainian border. The incoming headlines will influence the broader market risk sentiment and the USD price dynamics, which, in turn, should provide a fresh impetus to the NZD/USD pair.

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