NZD/USD spikes to 0.7200 neighborhood, lacks follow-through
- NZD/USD caught some fresh bids on Tuesday amid the emergence of some USD selling bias.
- The risk-on mood undermined the safe-haven USD and benefitted the perceived riskier kiwi.
- Rallying US bond yields could lend some support to the greenback and cap gains for the pair.
The USD selling bias picked up pace during the early European session and pushed the NZD/USD pair to daily tops, back closer to the 0.7200 mark.
Following the previous day's rejection slide of over 50 pips from the mentioned level, the pair caught some fresh bids on Tuesday and was supported by a broad-based US dollar weakness. The upbeat market mood undermined demand for the safe-haven USD and benefitted the perceived riskier kiwi.
Markets turned buoyant after top Democrats on Monday filed a joint $1.9 trillion budget measure in a step toward bypassing Republicans. Renewed hopes for a massive US fiscal stimulus, in turn, increased the prospects for a strong global economic recovery and boosted investors' confidence.
Meanwhile, expectations of a larger government borrowing, along with the risk-on flows triggered a fresh leg up in the US Treasury bond yields. This could help limit any meaningful slide for the greenback and cap gains for the NZD/USD pair, warranting caution for aggressive bullish traders.
Even from a technical perspective, repeated failures near the 0.7240-50 supply zone constituted the formation of a bearish head and shoulder pattern on short-term charts. This further makes it prudent to wait for some strong follow-through buying before positioning for a further appreciating move.
In the absence of any major market-moving economic releases from the US, the broader market risk sentiment will play a key role in influencing the NZD/USD pair's intraday movement. Apart from this, the US stimulus headlines will also be looked upon for some short-term trading opportunities.
Technical levels to watch