NZD/USD struggles to find acceptance above 200-DMA, holds steady around 0.6900 mark

• NZD/USD attracted some dip-buying on Monday, though the uptick lacked bullish conviction.
• The cautious market mood benefitted the safe-haven USD and capped the perceived riskier kiwi.
• Hawkish Fed, elevated US bond yields further underpinned the buck and acted as a headwind.

The NZD/USD pair retreated a few pips from the vicinity of the monthly peak and was last seen trading around the 0.6900 mark heading into the European session.

Following an early dip to the 0.6880-0.6875 region, the NZD/USD pair attracted some buying on Monday, albeit struggled to capitalize on the move beyond the very important 200-day SMA. The Russia-Ukraine conflict has shown no signs of ending and kept investors on the edge. This was evident from the prevalent cautious market mood, which benefitted the safe-haven US dollar and acted as a headwind for the perceived riskier kiwi.

The greenback was further underpinned by the fact that the Fed last week indicated that it could raise rates at all the six remaining meetings in 2022. This, along with hawkish comments by influential FOMC members and elevated US Treasury bond yields, further inspired the USD bulls. In fact, Louis Fed President James Bullard said on Friday that the central bank’s reputation was on the line if it failed to act with sufficient urgency.

Adding to this, Fed Governor Christopher Waller said that the war in Ukraine was the reason he didn’t push for a 50 bps rate hike, but that was definitely on the table for upcoming meetings. This helped the yield on the benchmark 10-year US government bond to hold steady just below the highest level since June 2019 touched last week.

That said, a combination of factors held back traders from placing aggressive bearish bets around the NZD/USD pair. Investors remain hopeful about the possibility of a peace deal to end the war in Ukraine. Apart from this, rising commodity prices extended some support to the resources-linked kiwi and extended some support to the major.

Investors also seemed reluctant and preferred to wait on the sidelines ahead of Fed Chair Jerome Powell's scheduled speech later during the US session. Nevertheless, the NZD/USD pair's inability to find acceptance above a technically significant 200-DMA makes it prudent to wait for some follow-through buying before positioning for further gains.

Technical levels to watch