NZD/USD grinds higher around 0.6800 on upbeat mood, Ukraine-Russia peace talks eyed

• NZD/USD seesaws inside 20-pips trading range around one-week high after renewing multi-day top.
• US Treasury yields, Wall Street benchmarks rallied, gold eased on hopes of Russia-Ukraine ceasefire discussion, Powell’s Testimony.
• Fed Chair Powell backed 0.25% rate-hike, Moscow-Kyiv talks may be held during early Thursday.
• China Caixin Services PMI, ANZ Commodity Price Index will be important in Asia, US session calendar is heavy.

NZD/USD refreshed weekly high to 0.6800 during Wednesday, dribbling around the same afterward, as markets portray risk-on mood amid the early Thursday morning in Asia.

The improvement in market sentiment could be linked to the headlines surrounding Ukraine and the US Federal Reserve (Fed) Chairman Jerome Powell’s Semi-Annual Monetary Policy Report before the House Financial Services Committee. Among them, hopes of discussion over a ceasefire between Kyiv and Moscow during the likely peace talks on Thursday and Fed Chair Powell’s strong favor for 0.25% rate hike in March, not 0.50%, could be cited as the key catalysts.

It’s worth noting that a Russian negotiator was quoted to share the news of a probable round of diplomatic talks on Thursday. On the same line, Interfax also mentioned, “A potential ceasefire will be discussed in upcoming talks with the Ukrainian delegation.”

On the other hand, Fed Chair Jerome Powell’s bi-annual testimony was slightly hawkish as it conveyed inflation concerns and showed readiness to lift the Fed rate by 0.50% if needed. However, the base case was a series of rate hikes starting with 25 basis points (bps) of a push in March.

Elsewhere, China finally termed the Russian invasion of Ukraine as “war” versus the previous terminology of a “special operation”, per Bloomberg as it quoted China’s Foreign Minister Wang Yi. Further, global rating agency Fitch also downgraded Russia’s Long-Term Foreign Currency Issuer Default Rating (IDR) to 'B' from 'BBB'.

Talking about the data, US ADP Employment Change rose past 388K forecast to 475K for February, which in turn raised hopes for a firmer US Nonfarm Payrolls (NFP) when released on Friday. At home, New Zealand’s Building Permits for January and Terms of Trade Index for Q4 both dropped below expectations and previous readouts.

Amid these plays, the US 10-year Treasury yields snapped a two-day downtrend to mark a stellar run-up of 17 bps to 1.878% whereas Wall Street benchmarks also rose notably by the end of Wednesday’s North American session.

Moving on, Russia-Ukraine talks will be crucial to watch for fresh impulse and so do China’s Caixin Services PMI for February, not to forget New Zealand ANZ Commodity Price Index for the said month. Following that, a slew of data is expected to be rolled out in the US session comprising ISM Services PMI, Factory Orders, Nonfarm Productivity, etc.

Given the likely improvement in the scheduled US data, as well as China’s recently positive PMIs and hopes of a ceasefire between Kyiv and Moscow, NZD/USD may have further upside to track.

Technical analysis

A clear upside break of a descending resistance line from mid-November, now support around 0.6735, directs NZD/USD prices towards the 100-day EMA hurdle of 0.6810.