NZD/USD corrects from multi-month peak, slides to mid-0.6900s amid stronger USD

• A broad-based USD strength prompted some selling around NZD/USD on Thursday.
• The Russia-Ukraine stand-off, Fed’s hawkish outlook benefitted the safe-haven USD.
• Investors eye US macro data and fresh geopolitical developments for a fresh impetus.

The NZD/USD pair maintained its offered tone through the early European session and was last seen trading near the daily low, around mid-0.6900s.

The pair witnessed some selling on Thursday and for now, seems to have stalled its recent bullish trend closer to the key 0.7000 psychological mark, or the four-month peak touched in the previous day. The downtick was exclusively sponsored by a broad-based US dollar strength, underpinned by the Fed's hawkish outlook.

In fact, comments by influential FOMC members, including Fed Chair Jerome Powell, have been fueling speculations that the Fed would adopt a more aggressive policy response to combat high inflation. Investors were quick to react and have started pricing in the possibility of a 50 bps rate hike at the May meeting.

The expectations were reinforced by elevated US Treasury bond yields, which were further supported by concerns that surging oil prices would continue to put upward pressure on already high inflation. This, along with the lack of progress in the Russia-Ukraine peace negotiations, further benefitted the safe-haven greenback.

Moving ahead, the market focus will remain glued to fresh geopolitical developments and US President Joe Biden's meeting with NATO/European leaders in an emergency summit on the Ukraine War. The incoming headlines will play a key role in influencing the broader market risk sentiment and drive demand for the buck.

Later during the early North American session, traders will take cues from the US macro releases - flash PMI prints, Durable Goods Orders and the usual Weekly Initial Jobless Claims. Apart from this, the US bond yields and the USD price dynamics should produce some meaningful trading opportunities around the NZD/USD pair.

Technical levels to watch