• NZD/USD has stabilised just above 0.6550, reflecting a better tone to risk appetite and commodity markets.
• But the pair remains at risk of a break towards 0.6500, as geopolitical, global growth and Fed tightening concerns mount.

NZD/USD traded with a slightly negative bias on Wednesday just above the 0.6550 mark, with bears eyeing a test of 2022’s late January lows at 0.6530. Stabilisation in commodity prices (excluding precious metals) and risk appetite (major US bourses are a tad higher on the day) seems to have facilitated some stabilisation in the likes of the risk and commodity-sensitive Aussie, loonie and kiwi currencies.

This has helped shield NZD/USD somewhat against the latest gains made by the US dollar. The US Dollar Index (DXY) recently broke out to its highest since early 2017 above 103.00, primarily as a result of weakness in the euro and yen. As tensions between the EU and Russia over sanctions and energy supplies grow, investor concerns about geopolitics and global growth weakness are unlikely to abate any time soon, suggesting the safe-haven US dollar will continue to do well.

Throw into the mix upcoming US Q1 2022 GDP growth and March Core PCE inflation data, scheduled for release on Thursday and Friday, that are expected to reinforce expectations for multiple 50 bps rate hikes from the Fed at upcoming meeting, and its no wonder the US dollar has been so strong as of late. NZD/USD remains very much at risk of breaking out to fresh year-to-date lows and towards a test of key support at the 0.6500 level.