The NZD/USD pair edged higher through the early European session and climbed to a one-week high, around the 0.6825 region in the last hour.
The pair built on its goodish recovery move from the 0.6700 round-figure mark, or the YTD low touched earlier this week and gained positive traction for the third successive day on Thursday. Investors turned optimistic amid receding fears that the new fast-spreading COVID-19 variant could derail the economic recovery. This was evident from a generally positive tone around the equity markets, which acted as a tailwind for the perceived riskier kiwi.
Reports indicated that the current vaccines may be more effective than first thought in fighting the Omicron variant. Moreover, news from a South African study suggested reduced risks of hospitalisation and severe disease in people infected with Omicron compared with the Delta strain, which further boosted the risk sentiment. The upbeat market mood undermined the safe-haven US dollar and provided an additional boost to the NZD/USD pair.
Apart from this, the uptick could also be attributed to some technical buying on a sustained strength above the 0.6800 round-figure mark. Hence, a subsequent strength back towards testing the monthly swing high, around the 0.6865-70 region, remains a distinct possibility. Some follow-through buying will be seen as a fresh trigger for bullish traders and set the stage for an extension of the ongoing recovery move for the NZD/USD pair.
Market participants now look forward to the US economic docket – highlighting the release of Core PCE Price Index and Durable Goods Orders data later during the early North American session. This, along with developments surrounding the coronavirus saga, will influence the USD price dynamics and provide some impetus to the NZD/USD pair. Traders will further take cues from the broader market risk sentiment to grab some short-term opportunities.
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