NZD/USD remains on the defensive below mid-0.6300s, US CPI looms large

• NZD/USD meets with a fresh supply on Tuesday, though the downside remains cushioned.
• The ongoing USD retracement slide from multi-week high acts as a tailwind for the major.  
• Traders also seem reluctant to place aggressive bets and keenly await the key US CPI data.

The NZD/USD pair attracts some sellers following an early uptick to the 0.6365 area and reverses a part of the previous day's positive move. The pair remains depressed heading into the North American session and is currently placed near the lower end of its daily range, just below mid-0.6300s.

The downside for the NZD/USD pair, meanwhile, remains limited amid strong follow-through selling around the US Dollar, which is seen extending the overnight pullback from a multi-week high. A further decline in the US Treasury bond yields, along with signs of stability in the financial markets, turn out to be a key factor weighing on the safe-haven Greenback. Traders, however, seem reluctant to place aggressive bets and keenly await the release of the latest US consumer inflation figures.

The crucial US CPI report will play a key role in influencing the Fed's rate-hike path, which, in turn, should drive the USD demand and help determine the near-term trajectory for the NZD/USD pair. In the meantime, the risk of stronger US inflation data should help limit the USD losses. The expectations were fueled by the US Labor Department's annual revisions of CPI data last Friday, which showed that monthly consumer prices rose in December instead of falling as previously estimated.

Moreover, several Federal Open Market Committee (FOMC) policymakers, including Fed Chair Jerome Powell, recently stressed the need for additional interest rate hikes to fully gain control of inflation. Hence, any positive surprise from the US CPI print should allow the US central bank to stick to its hawkish stance for longer. This could trigger a fresh leg up for the USD and set the stage for an extension of the NZD/USD pair's recent pullback from its highest level since June 2022.

Technical levels to watch