NZD/USD grinds near three-week high above 0.6200 as Kiwi traders brace for RBNZ, US inflation

• NZD/USD struggles to defend three-day uptrend at monthly top, retreats from recent peak of late.
• Cautious mood ahead of top-tier data/events join pre-RBNZ anxiety to prod Kiwi bulls.
• Downbeat US inflation expectations, NFP weigh on US Dollar.
• Traders anticipate RBNZ’s inaction, softer US CPI and flag fears of heavy reaction to surprises.

NZD/USD pares intraday gains around 0.6215-10 as it reverses from the highest levels in three weeks heading into Tuesday’s European session. In doing so, the Kiwi pair struggles to defend the three-day uptrend amid the market’s cautious mood ahead of Wednesday’s Reserve Bank of New Zealand (RBNZ) Interest Rate Decision and the US inflation data for June per the Consumer Price Index (CPI) indicator.

It’s worth noting that the US Dollar renews a two-month low of around 101.75 by the press time as market players fear downbeat US inflation data and challenges for the Federal Reserve’s (Fed) further rate hikes, especially after Friday’s disappointment from the US jobs report.

The fears of softer US inflation gained momentum on Monday after the New York Federal Reserve’s (Fed) monthly inflation expectations survey suggested the US consumers' one-year inflation expectation dropped to the lowest level since April 2021 at 3.8% in June from 4.1% in May. Previously, the US Nonfarm Payrolls (NFP) marked the first below-expectations print in 15 months and drowned the US Dollar to make it post the biggest daily loss in three weeks.

On the other hand, Monday’s downbeat China inflation joined the market’s fears of the RBNZ’s inaction, after consecutive rate hikes since October 2021, to prod the NZD/USD buyers amid sluggish market sentiment.

While portraying the mood, the S&P500 Futures seesaw around 4,445, up 0.05% intraday, struggling to extend the previous day’s recovery from the lowest level since June 29. That said, the US Treasury bond yields remain pressured after reversing from the highest level since March on Monday. It should be noted that the benchmark US 10-year Treasury bond yields printed the first daily loss in July the previous day whereas the two-year counterpart declined for the second consecutive day, to respectively near 3.99% and 4.85% at the latest.

Moving on, a light calendar and chatters about the US-China tension may join the hawkish Fed talks to prod the NZD/USD bulls ahead of the key RBNZ. Should New Zealand’s central bank surprise markets with a rate hike, even of 0.25%, the Kiwi pair may rally towards the late May swing high. Even if it doesn’t, downbeat US inflation data can keep the quote firmer.

Technical analysis

Despite the latest pullback, the NZD/USD pair buyers remain hopeful unless the quote stays beyond a convergence of the 100-DMA and the previous resistance line from May 19, close to 0.6185-80 by the press time.