NZD/USD moves back above 100-day SMA, around mid-0.7000s

• A combination of factors assisted NZD/USD to gain strong positive traction on Thursday.
• Retreating US bond yields prompted USD long-unwinding for the second successive day.
• Rising bets for another RNBZ rate hike remained supportive of the intraday positive move.
• Hawkish Fed expectations could limit the USD pullback and cap further gains for the pair.

The NZD/USD pair continued gaining traction through the mid-European session and touched a fresh daily high, around mid-0.7000s in the last hour.

Following the previous day's two-way price moves, the NZD/USD pair caught some fresh bids on Thursday and jumped back above the 100-day SMA amid some follow-through US dollar profit-taking. Retreating US Treasury bond yields turned out to be a key factor that prompted some USD long-unwinding for the second successive day.

This, along with a generally positive tone around the equity markets, further drove flows towards the perceived riskier kiwi. Apart from this, rising bets for yet another rate hike by the Reserve Bank of New Zealand (RBNZ) later this month acted as a tailwind and remained supportive of the strong bid tone around the NZD/USD pair.

Meanwhile, the prospects for an early policy tightening by the Fed should help limit any meaningful USD pullback. In fact, the markets have started pricing in the possibility for a rate hike by July 2022 and the Fed funds futures indicate a high likelihood of another raise by November amid worries about rising inflationary pressures.

This, in turn, might keep a lid on any further gains for the NZD/USD pair, at least for the time being, warranting some caution before placing aggressive bullish bets. Market participants now look forward to the US economic docket, featuring the release of the Philly Fed Manufacturing Index and the usual Weekly Initial Jobless Claims.

Traders will further take cues from the US bond yields and a scheduled speech by New York Fed President John Williams, which might influence the USD and provide some impetus to the NZD/USD pair. Apart from this, the broader market risk sentiment could further produce some meaningful trading opportunities around the NZD/USD pair.

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