NZD/USD hits over one-month high, around 0.6330 area amid modest USD weakness

• NZD/USD gains traction for the fifth straight day and climbs to over a one-month high.
• The prevalent USD selling bias, along with a positive risk tone, continues to lend support.
• The fundamental backdrop favour of bullish traders ahead of the US CPI on Wednesday.

The NZD/USD pair scales higher for the fifth successive day, also marking the seventh day of a positive move in the previous eight and jumps to over a one-month high on Monday. The pair maintains its bid tone through the early European session and is currently placed around the 0.6325-0.6330 region, up over 0.75% for the day.

The US Dollar (USD) kicks off the new week on a weaker note and remains well within the striking distance of the monthly low touched last Thursday, which, in turn, is seen acting as a tailwind for the NZD/USD pair. Growing acceptance that the Federal Reserve (Fed) is approaching the end of its rate-hiking cycles overshadows the better-than-expected release of the US monthly employment details on Friday. This, along with concerns about the US banking sector and the debt ceiling, keeps the US Treasury bond yields depressed and continues to weigh on the Greenback.

Apart from this, a generally positive tone around the equity markets further undermines the safe-haven buck and benefits the risk-sensitive Kiwi. The New Zealand Dollar (NZD) draw additional support from the upbeat domestic jobs data released last week, which backs the case for further interest rate hikes by the Reserve Bank of New Zealand (RBNZ). Adding to this, hawkish remarks by RBNZ Deputy Governor Christian Hawkesby, saying that the underlying economy has strength and New Zealand banks are well-positioned to support customers, lend support to the NZD/USD pair.

The ongoing strong move up could also be attributed to some technical buying following last week's sustained breakout through the very important 200-day Simple Moving Average (SMA). This, along with the fact that oscillators on the daily chat are still far from being in the overbought zone, supports prospects for a further near-term appreciating move for the NZD/USD pair. In the absence of any relevant market-moving economic releases from the US, the US bond yields will influence the USD. Apart from this, the broader risk sentiment should provide some impetus on Monday.

The market focus, meanwhile, will remain glued to the release of the latest US consumer inflation figures on Wednesday. Any upside surprise would challenge bets for a rate cut as soon as September and prompt some near-term short-covering around the USD. This, in turn, warrants some caution for aggressive bullish traders and before positioning for any further appreciating move for the NZD/USD pair, at least for the time being.

Technical levels to watch