• NZD/USD bears are moving in during the latter part of Tuesday. 
• the US dollar remains in the driver's seat as the US yields rally again. 

NZD/USD was pressured into the final stages of Wall Street trade on Tuesday. At 0.6730, the bird is losing flight from a high of 0.6763 and trades close to the lows of the day, 0.6720. The US dollar was on fire this week and DXY index is up for the fourth straight day, marking a fresh cycle high near 101.023. 

''The Kiwi tried to rally yesterday as local rates moved up and markets digested Governor Orr’s frank and on balance, hawkish speech yesterday morning,'' analysts at ANZ Bank said.

''Having held key support (with 0.6723 being the 61.8% Fibo of the January-April rally), it looked like the Kiwi’s four-day losing streak might end. However, it is now back at that key level amid a surge in US bond yields (10yr yields are at a new cycle high) and a fall in milk prices at last night’s GDT auction. But the big threat seems to simply be that the local market is fully priced, but that’s not the case elsewhere.''

All eyes on the Fed and USD

Meanwhile, US rates have made a further push higher on Monday-Tuesday as the Fed's Jim Bullard didn't rule out a 75bps hike by the Fed. The US benchmark 10-year Treasury yields hit 2.928% on Tuesday, the highest since December 2018 and are on track to test the October 2018 high near 3.26%. This is supporting flows into the greenback ahead of next month's Fed meeting. 

''With inflation expectations remaining fairly steady, the real 10-year yield traded near -0.04% today, the highest since March 2020 and poised to move into positive territory for the first time since the pandemic began,'' analysts at Brown Brothers Harriman explained. ''The 2-year is still lagging a bit but traded at 2.47% today, not yet matching the 2.60% cycle high from earlier this month but still on track to test the November 2018 high near 2.97%.'' 

Bullard reiterated that he wants to get rates up to 3.5% quickly, noting “You can’t do it all at once, but I think it behoves us to get to that level by the end of the year.” 

Also, Charles Evans, Chicago Fed President spoke on Tuesday and said that there is good reason to think the US economy will do very well even as rates rise. He added that the Fed needs to be mindful of a possible wage-price spiral when noting that Fed needs to monitor this.