NZD/USD recovers early lost ground, upside remains capped amid geopolitical risks

• NZD/USD attracted dip-buying near the 0.6760 area on Thursday, though lacked follow-through.
• A generally positive risk tone was seen as a key factor that benefitted the perceived riskier kiwi.
• Geopolitical risks continued underpinning the greenback and kept a lid on any meaningful upside.

The NZD/USD pair reversed an intraday dip and climbed to a fresh daily high during the early European session, with bulls now awaiting sustained strength beyond the 0.6800 mark.

The pair attracted some dip-buying near the 0.6760 region on Thursday and might now be looking to build on its recent upward trajectory witnessed over the past one month or so. The intraday uptick was sponsored by a generally positive risk tone, which tends to benefit the perceived riskier kiwi.

Despite rising geopolitical tensions, hopes of ceasefire talks between Russia and Ukraine remained supportive of a positive tone around the equity markets. That said, the worsening situation in Ukraine continued underpinning the safe-haven US dollar and capped the upside for the NZD/USD pair.

In the latest developments, Russia has intensified the bombardment of Ukrainian cities and Russian forces have captured the Black Sea port of Kherson. This, in turn, warrants some caution before placing aggressive bullish bets around the NZD/USD pair and positioning for further gains.

Market participants now look forward to the release of the usual Weekly Initial Jobless Claims data, due later during the early North American session. This, along with Fed Chair Jerome Powell's second day of testimony before the Senate Banking Committee, might influence the USD.

Apart from this, traders will take cues from fresh developments surrounding the Russia-Ukraine saga, which will continue to play a key role in driving the broader market risk sentiment. The combination of factors could produce some short-term trading opportunities around the NZD/USD pair.

Technical levels to watch