• NZDUSD is seen consolidating last week’s post-US CPI rally to a two-month high.
• Rebounding US bond yields helps revive the USD demand and acts as a headwind.
• The downside remains limited amid rising bets for smaller rate hikes by the Fed.

The NZDUSD pair struggles to capitalize on last week's breakout momentum through the 100-day SMA and seesaws between tepid gains/minor losses through the early European session on Monday. The pair is currently placed just below the 0.6100 mark, nearly unchanged for the day and remains well within the striking distance of a two-month high touched on Friday.

A combination of factors assists the US Dollar to stall softer US consumer inflation figures-inspired slump to its lowest level since mid-August, which, in turn, acts as a headwind for the NZDUSD pair. The US Treasury bond yields edge up in reaction to more hawkish remarks by Fed Governor Christopher Waller on Sunday. This, along with a softer tone around the equity markets, is seen benefitting the safe-haven greenback and exerting some downward pressure on the risk-sensitive Kiwi.

During a conversation in Sydney, Australia, Waller noted that markets have overreacted to the softer-than-expected October consumer price inflation data last week. Waller added that the Fed was not softening its fight against inflation and that it will take a string of soft CPI reports for the US central bank to take its foot off the brakes. This pushes the US Treasury bond yields higher and helps revive the USD demand, though the intraday uptick lacks bullish conviction.

Firming expectations that the Fed will slow the pace of its policy tightening is holding back the USD bulls from placing aggressive bets. Furthermore, the optimism over an eventual scaling back of COVID-19 measures in China offers some support to the NZDUSD pair and limits the downside. Hence, the intraday subdued price move might be categorized as a bullish consolidation phase, suggesting that any meaningful pullback is more likely to get bought into and remain limited.

There isn't any major market-moving economic data due for release from the US on Monday, leaving the USD at the mercy of the US bond yields. Apart from this, traders will take cues from a scheduled speech by Fed Governor Lael Brainard. This, along with the broader risk sentiment, will be looked upon for short-term trading opportunities around the NZDUSD pair ahead of the Chinese data dump on Tuesday.

Technical levels to watch