NZD/USD hits fresh daily high, back near mid-0.6200s amid renewed USD selling

• NZD/USD edges higher during the Asian session on Tuesday, albeit lacks follow-through.
• Bets that the Fed will soon end its rate-hiking cycle undermine the USD and lend support.
• A positive risk tone further undermines the safe-haven buck ahead of US Retail Sales data.

The NZD/USD pair manages to defend the 0.6300 mark and attracts some buying during the Asian session on Tuesday, stalling its retracement slide from levels just above the 0.6400 round figure or the highest since early February touched last week. Spot prices currently trade just below mid-0.6200s, up nearly 0.30% for the day and draw support from a modest US Dollar (USD) downtick.

In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, remains well within the striking distance of a 15-month low set last Friday and continues to be undermined by rising bets for a less hawkish Federal Reserve (Fed). Investors now seem convinced that the US central bank is nearing the end of its policy tightening cycles and have been pricing out the possibility of any further rate hikes this year, following the expected 25 bps lift-off in July. This had led to the recent pullback in the US Treasury bond yields and keeps the USD bulls on the defensive.

Apart from this, a generally positive risk tone is seen as another factor weighing on the safe-haven buck and lending some support to the risk-sensitive Kiwi. Meanwhile, the weaker Chinese GDP print released on Monday adds to worries about a global economic downturn and might cap any optimism in the markets. Furthermore, expectations that the Fed might stick to its forecast for a 50 bps rate hike this year might hold back traders from placing aggressive bearish bets around the USD. This, in turn, should keep a lid on any meaningful appreciating move for the NZD/USD pair.

Market participants now look forward to the US economic docket, featuring the release of monthly Retail Sales and Industrial Production figures later during the early North American session. This, along with the US bond yields and the broader risk sentiment, might influence the USD and provide some impetus to the NZD/USD pair. The aforementioned fundamental backdrop, meanwhile, makes it prudent to wait for some follow-through buying before confirming that the recent pullback from a multi-month high has run its course and placing fresh bullish bets around the pair.

Technical levels to watch