NZD/USD climbs above mid-0.7000s, three-week tops

• A combination of factors pushed NZD/USD higher for the third successive session on Friday.
• The risk-on mood benefitted the perceived riskier kiwi amid a subdued USD price action.
• Investors now look forward to a rather busy US economic docket for some trading impetus.

The NZD/USD pair extended its appreciating move heading into the European session and shot to three-week tops, around the 0.7060 region in the last hour.

A combination of factors assisted the NZD/USD pair to prolong this week's strong positive move from the vicinity of the 0.6900 mark and gain traction for the third consecutive session on Friday. The prevalent risk-on mood was seen as a key factor that benefitted the perceived riskier kiwi. This, along with a subdued US dollar price action, provided an additional boost to the major.

The greenback has been rallying rallied since early September on expectations for an early policy tightening by the Fed. The minutes of the September FOMC meeting reaffirmed that the Fed remains on track to begin tapering its bond purchases in 2021. Adding to this, fears of a faster than expected rise in inflation have been fueling speculations about a potential Fed rate hike move in 2022.

Investors, however, still seem unconvinced about a sustained period of inflation despite Wednesday's slightly stronger than expected US CPI report. This was reinforced by a sharp pullback in the longer-dated US Treasury bond yields, which triggered a USD corrective slide from 13-month tops touched earlier this week. This, in turn, was seen as a key factor driving the NZD/USD pair higher.

Apart from this, the ongoing positive momentum could further be attributed to some technical buying on a sustained breakthrough the 50-day SMA, around the key 0.7000 psychological mark on Thursday. Given that technical indicators on the daily chart have just started gaining positive traction, a subsequent move beyond 100-day SMA might have set the stage for additional gains for the NZD/USD pair.

Market participants now look forward to the US economic docket – highlighting the release of Retail Sales, Empire State Manufacturing Index and Prelim Michigan Consumer Sentiment Index. This, along with the US bond yields and a scheduled speech by New York Fed President John Williams, will influence the USD later during the early North American session. Apart from this, the broader market risk sentiment would provide some impetus to the NZD/USD pair and produce some short-term trading opportunities.

Technical levels to watch