NZD/USD surrenders a major part of intraday gains, drifts below 0.7200 mark

A combination of factors provided a modest intraday lift to NZD/USD on Wednesday.
An uptick in the US bond yields underpinned the USD and capped any further upside.
Investors now eye the US ISM Services PMI for some short-term trading opportunities.

The NZD/USD pair surrendered a major part of its intraday gains to weekly tops and has now slipped back below the 0.7200 round-figure mark.

The pair built on the previous day’s goodish rebound of over 60 pips from the 0.7135 region and gained some follow-through traction through the first half of the trading action on Wednesday. The prevalent upbeat market mood benefitted the perceived riskier kiwi and provided a modest lift to the NZD/USD pair.

The global risk sentiment remained well supported by renewed optimism over a massive US fiscal stimulus. In the latest development, Democrats took the first step to advance President Joe Biden’s proposed aid package and opened debate on a fiscal 2021 budget resolution with coronavirus spending instructions.

Bulls further took cues from better-than-expected employment details from New Zealand, which showed that the unemployment rate unexpectedly fell to 4.9% in Q4. The reading was well below consensus estimates pointing to a rise to 5.6% from 5.3% previous and was accompanied by a 0.6% rise in the number of employed people.

The uptick, however, lacked any strong follow-through and once again ran out of the steam near the 0.7225 region amid a modest pickup in the US dollar demand. Expectations for a larger government borrowing continued pushing the US Treasury bond yields higher, which was seen as a key factor that underpinned the greenback.

Moving ahead, market participants now look forward to the release of the US ISM Services PMI for some impetus. This, along with the US stimulus headlines, will influence the USD price dynamics. Apart from this, the broader market risk sentiment might further contribute to produce some trading opportunities around the NZD/USD.

Technical levels to watch