NZD/USD flirts with daily low, around mid-0.6400s amid modest USD strength

• NSX/USD met with a fresh supply on Wednesday and edged back closer to a two-week low.
• A goodish pickup in the US bond yields revive the USD demand and exerted some pressure.
• A softer risk tone also benefitted the safe-haven USD and weighed on the risk-sensitive kiwi.

The NZD/USD pair struggled to capitalize on the previous day's goodish rebound from the 0.6420 area, or a near two-week low and came under some renewed selling pressure on Wednesday. The pair maintained its bid tone through the early European session and was last seen trading just above mid-0.6400s.

The US dollar was back in demand amid a fresh leg up in the US Treasury bond yields and turned out to be a key factor that exerted downward pressure on the NZD/USD pair. In fact, the yield on the benchmark 10-year US government bond moved back above 3.0%, closer to a nearly four-week high touched earlier this week amid worries about persistent inflation.

Investors remain concerned that global supply chain disruption caused by the Russia-Ukraine war would continue to push consumer prices higher. This might force the US central bank to tighten its monetary policy at a faster pace. Hence, the market focus will remain glued to the latest US consumer inflation figures, due for release on Friday.

In the meantime, doubts that central banks can hike interest rates to curb inflation without impacting economic growth kept a lid on the overnight optimistic move in the markets. This further benefitted the greenback's relative safe-haven status and drove flows away from the risk-sensitive kiwi, supporting prospects for an extension of the intraday downfall.

In the absence of top-tier US economic data on Wednesday, the US bond yields will play a key role in influencing the USD price dynamics and provide some impetus to the NZD/USD pair. Apart from this, traders will take cues from the broader market risk sentiment to grab short-term opportunities around the major.

Technical levels to watch