NZD/USD peaks above 0.6300 helped by a weaker US dollar

• Risk appetite on Monday favors the kiwi.
• US dollar erases NFP gains, DXY falls toward 106.00.
• NZD/USD supported by the 20-day SMA.

The NZD/USD is rising on Monday, although it trimmed gains during the last hours. The pair peaked at 0.6303 and then pulled back to 0.6280. It is positive ground for the day, supported by a weaker US dollar and risk appetite.

The greenback is falling across the board as US yields move to the downside. The US 10-year stands at 2.76%, far from Friday’s top of 2.88%. The DXY falls 0.25% and trades below 106.30.

A report from the Reserve Bank of New Zealand showed a decline in inflation expectations. “The outcome provides some relief but does little to alter the bigger picture - short-term inflation expectations (2y) remain well above the 1-3% target band, Q2 headline CPI and non-tradeable inflation handily exceeded the RBNZ's May MPS forecasts while core inflation measures are edging higher. Along with accelerating wages growth, the data suggest that the RBNZ's job is still not done and look for a 4th straight 50bps hike at the upcoming Aug meeting”, explained analysts at TD Securities.

In the US the key number of the week is the CPI on Wednesday. The NFP report opened again the doors to a more aggressive Federal Reserve. Inflation figures (also the PPI on Thursday) will likely impact on Fed rate expectations.

Technical outlook

The NZD/USD remains supported by the 0.6210/20 area and the 20-day Simple Moving Average (SMA), today at 0.6230. A consolidation below those levels should point to more losses in the short-term.

On the upside, NZD/USD is testing the 0.6300 area that contains the 55-day SMA. A break higher could lead to a test of the August high at 0.6332.

Technical levels