• NZD/USD gained positive traction on Wednesday and snapped a four-day losing streak to the YTD low.
• Retreating US bond yields, the risk-on impulse weighed on the safe-haven USD and extended support.
• Aggressive Fed rate hike bets should limit the USD losses and cap the major ahead of the US CPI report.

The NZD/USD pair extended its steady intraday ascent through the first half of the European session and climbed to a fresh daily high, around mid-0.6300s in the last hour.

The pair witnessed a short-covering bounce on Wednesday and for now, seems to have snapped a four-day losing streak to its lowest level since June 2020, around the 0.6275 area touched the previous day. The ongoing retracement slide in the US Treasury bond yields prompted some selling around the US dollar. Apart from this, a strong recovery in the global risk sentiment further undermined the safe-haven buck and extended support to the perceived riskier kiwi.

That said, lingering recession fears - amid tight global supply chains resulting from China's zero-covid policy and the war in Ukraine - acted as a tailwind for the buck. In fact, the markets seem convinced that the Fed would need to tighten its monetary policy at a faster pace to combat stubbornly high inflation and are pricing in a 200 bps rate hike for the rest of 2022. This, in turn, should limit the USD losses and cap the upside for the NZD/USD pair.

Hence, the focus will remain glued to the latest US consumer inflation figures, due for release later during the early North American session. The US CPI report would influence the Fed's tightening path and influence the near-term USD price dynamics. This, along with the broader market risk sentiment should provide a meaningful impetus to the NZD/USD pair and allow traders to grab short-term opportunities.

Technical levels to watch