NZD/USD Fades as USD Finds Solace on Hawkish Fed

The NZD/USD traders were taken on a ride of volatility on Thursday as the markets positioned for macro inflationary pressures which flows made their way through every facet of the forex space.

The commodity complex was bid on the inflation hedge play which initially supported the kiwi after the knee-jerk bid in the greenback before it was met with heavy supply again in midday trade.

At 0.6685, NZD/USD is around flat on the day after travelling between a low of 0.6652 and a high of 0.6732 in the final hours of Wall Street’s trade. The bird spiked lower after the Federal Reserve James Bullard spoke out over the hot US inflation data, commenting that the central bank could be considering meeting rate hikes. He has said that he favours a 50bp hike in March and 10bps by July.

Volatility remains the order of the day. Higher US yields are battling things like higher commodity prices for attention; while rates have had less of an influence on FX of late, the knee-jerk reaction to higher US bond yields tends to be NZD-negative.

The NZD/USD bulls are taking charge in a significant correction, that was moving in on old lows near 0.67 the figure and towards the neckline of the M-formation near 0.6733, the price reached the target on Thursday. This resided between the 50% mean reversion and the 61.8% ratio.