NZD/USD climbs to 0.6700 neighbourhood, two-week high amid risk-on/modest USD weakness

• NZD/USD gained traction for the third successive day and shot to a two-week high on Wednesday.
• The risk-on impulse in the markets was seen as a key factor that benefitted the perceived riskier kiwi.
• Retreating US bond yields undermined the USD and remained supportive of the ongoing move up.

The NZD/USD pair scaled higher through the mid-European session and shot to a two-week high, around the 0.6690 region in the last hour.

A combination of supporting factors assisted the NZD/USD pair to build on this week's positive move from the 0.6600 mark and gain traction for the third successive day on Wednesday. Moderation of the US Treasury bond yields prompted some US dollar selling. This, along with the risk-on impulse, further benefitted the perceived riskier kiwi and remained supportive of the momentum.

That said, growing market acceptance that the Fed will tighten its monetary policy at a faster pace than anticipated should act as a tailwind for the US bond yields and limit losses for the greenback. In fact, the market has been pricing in the possibility of a 50 bps rate hike by the US central bank in March amid worries about the persistent rise in inflationary pressures.

Hence, the market focus will remain glued to the release of the US CPI report on Thursday, which might determine the Fed's near-term policy outlook and influence the USD price dynamics. Heading into the key data risk, traders might refrain from placing aggressive bets, which, in turn, could cap the upside for the NZD/USD pair amid absent market-moving economic releases.

In the meantime, the US bond yields will continue to play a key role in driving the USD demand and provide some impetus to the NZD/USD pair. Apart from this, traders might take cues from the broader market risk sentiment to grab some short-term opportunities around the major.

Technical levels to watch