NZD/USD remains depressed near 0.6900 mark, just above one-and-half-week low

• NZD/USD edged lower for the second successive day and retreated further from the YTD peak.
• The Ukraine crisis weighed on investors’ sentiment and undermined the perceived riskier kiwi.
• Modest pullback in the US bond yields kept the USD bulls on the defensive and extended support.

The NZD/USD pair remained depressed through the early European session and was last seen trading around the 0.6900 mark, just a few pips above the one-and-half-week low touched earlier this Thursday.

The pair witnessed selling for the second successive day and has now retreated nearly 150 pips from the highest level since November 2021, around the 0.7035 area touched earlier this week. The market sentiment remains fragile amid fading hopes for a diplomatic solution to end the war in Ukraine and the prospect of more Western sanctions on Russia over its alleged war crimes. This, in turn, was seen as a key factor that weighed on the perceived riskier kiwi.

The anti-risk flow was reinforced by modest pullback in the US Treasury bond yields, which kept a lid on the recent US dollar rally to a nearly two-year peak and extended some support to the NZD/USD pair. That said, any meaningful upside seems elusive amid the Fed's hawkish outlook, which should continue to act as a tailwind for the greenback. In fact, the FOMC minutes showed that policymakers were prepared to hike interest rates by 50 bps at upcoming meetings.

The minutes also showed general agreement about reducing the central bank’s massive balance sheet at a maximum pace of $95 billion per month to tighten financial conditions. This supports prospects for the emergence of some USD dip-buying, suggesting that the NZD/USD pair's attempted recovery move is more likely to attract fresh selling at higher levels. Traders now look forward to US Weekly Jobless Claims data for some impetus later during the early North American session.

Apart from this, the US bond yields will influence the USD price dynamics and produce some meaningful trading opportunities around the NZD/USD pair. Traders will further take cues from developments surrounding the Russia-Ukraine saga, which should continue to play a key role in driving the broader market risk sentiment.

Technical levels to watch