NZD/USD holds above 0.6200 mark, modest USD weakness remains supportive

• NZD/USD regains positive traction on Monday, albeit the uptick lacks bullish conviction.
• A positive risk tone undermines the safe-haven USD and benefits the risk-sensitive Kiwi.
• Rising US bond yields underpin the USD amid hawkish Fed expectations and cap gains.

The NZD/USD pair attracts some buyers on the first day of a new week and for now, seems to have stalled last week's sharp retracement slide from the 0.6385 region, or a nearly three-month high. The pair maintains its bid tone heading into the North American session and is currently placed near the top end of its daily range, comfortably above the 0.6200 mark.

A modest recovery in the global risk sentiment - as depicted by a generally positive tone around the equity markets - prompts some selling around the safe-haven US Dollar (USD) and benefits the risk-sensitive Kiwi. That said, the modest USD pullback from its highest level since April is more likely to remain cushioned in the wake of a rise in the long-term US consumer inflation expectations.

In fact, the preliminary May reading from the University of Michigan released on Friday showed that consumers see prices over the next five years climbing at an annual rate of 3.2%  - the highest since 2011. This could force the Federal Reserve (Fed) to keep interest rates higher for longer, which remains supportive of a modest rise in the US Treasury bond yields and should lend support to the USD.

Additional details of the Michigan survey revealed that consumer sentiment slumped to a six-month low in May in the wake of a standoff to raise the federal government's borrowing. This further fuels worries about an imminent recession, which should further contribute to limiting losses for the safe-haven Greenback and keeping a lid on any meaningful upside for the NZD/USD pair, at least for now.

Market participants now look to the release of the Empire State Manufacturing Index, which, along with speeches by influential FOMC members and the US bond yields, will drive the USD demand. Apart from this, traders will take cues from the broader risk sentiment to grab short-term opportunities around the NZD/USD pair. Nevertheless, spot prices, for now, seem to have snapped a two-day losing streak.

Technical levels to watch