NZD/USD steadily climbs back to 0.6500 mark amid weaker USD, US Q4 GDP in focus

• NZD/USD regains some positive traction amid the prevalent USD selling bias.
• Bets for smaller rate hikes by the Fed continue to weigh on the greenback.
• Traders now look forward to the Advance US Q4 GDP print for some impetus.

The NZD/USD pair attracts some dip-buying in the vicinity of mid-0.6400s on Thursday and climbs to a fresh daily high during the early European session. The pair is currently placed just below the 0.6500 psychological mark, though the intraday uptick lacks bullish conviction.

The US Dollar remains depressed near an eight-month low amid firming expectations for a less aggressive policy tightening by the Fed, which, in turn, is seen lending support to the NZD/USD pair. In fact, the markets seem convinced that the US central bank will soften its hawkish stance and have been pricing in a greater chance of a smaller 25 bps rate hike in February. This, along with a generally positive tone around the equity markets, undermines the safe-haven greenback and benefits the risk-sensitive Kiwi.

The upside for the NZD/USD pair, however, seems limited amid speculations that the Reserve Bank of New Zealand (RBNZ) will slow the pace of its monetary tightening. In fact, investors trimmed their bets for jumbo rate hikes after data released on Wednesday showed that the annual inflation rate in New Zealand fell short of the RBNZ's 7.5% forecast and held steady at 7.2%. Traders also seem reluctant and prefer to move to wait for the Advance US Q4 GDP print, due later during the early North American session.

Thursday's US economic docket also features the release of Durable Goods Orders and New Home Sales data. Apart from this, the broader risk sentiment might influence the USD price dynamics. The focus will then shift to the US Core PCE Price Index on Friday. This will play a key role in influencing the Fed's rate-hike strategy and provide some meaningful impetus to the NZD/USD pair heading into next week's key central bank event risk - the highly-anticipated FOMC decision on Wednesday.

Technical levels to watch