NZD/USD struggles for direction, stuck in a range around 0.7200 mark
- NZD/USD was confined in a narrow trading band through the Asian session on Tuesday.
- A cautious mood around the equity markets capped gains for the perceived riskier kiwi.
- The USD bulls seemed reluctant amid softer US bond yields and extended some support.
The NZD/USD pair lacked any firm directional bias and remained confined in a narrow trading band, just below the 0.7200 mark through the Asian session.
A combination of factors failed to assist the pair to build on the previous day's modest gains, rather led to subdued price moves through the early part of the trading action on Tuesday. Investors turned cautious amid growing concerns regarding the safety of the Oxford/AstraZeneca coronavirus vaccine. This, in turn, was seen as a key factor capping the upside for the perceived riskier kiwi.
On the other hand, the US dollar held on to its modest gains, though lacked any strong follow-through amid a softer tone surrounding the US Treasury bond yields. Expectations that the Fed would take some action to curb the sharp rise in long-term borrowing cost provided some respite to bond traders, which held the USD bulls from placing fresh bets and extended some support to the NZD/USD pair.
Investors also seemed reluctant and preferred to wait on the sidelines heading into this week's key event risk – the FOMC monetary policy decision on Wednesday. This further contributed to the NZD/USD pair's subdued/range-bound price action, warranting some caution for aggressive traders and before positioning for any firm near-term direction.
In the meantime, market participants will look forward to Tuesday's release of the US monthly Retail Sales report later during the early North American session. Apart from this, the US bond yields will influence the USD price dynamics. This, along with the broader market risk sentiment, might provide some impetus and assist traders to grab some short-term opportunities around the NZD/USD pair.
Technical levels to watch