NZD/USD clings to modest intraday gains above 0.7000 mark

• NZD/USD attracted some dip-buying on Monday and recovered a part of the post-NFP losses.
• Stronger Chinese inflation figures extended support to the kiwi amid a modest USD pullback.
• Bets for an earlier Fed taper, rallying US bond yields should underpin the USD and cap gains.

The NZD/USD pair held on to its modest intraday gains through the early European session and was last seen trading near daily tops, above the key 0.7000 psychological mark.

Following an early slide to multi-day lows, the NZD/USD pair attracted some buying near the 0.6980 region on the first day of a new week and has now recovered a part of its post-NFP losses. The RBNZ's intention to implement stricter curbs on mortgage lending acted as a tailwind for the kiwi, which was further supported by stronger Chinese inflation figures. Apart from this, a modest US dollar pullback from two-week lows provided a modest lift to the major.

The NZD/USD pair, for now, seems to have stalled last week's rejection slide from the very important 200-day SMA, though the upside is likely to remain capped. Friday's blockbuster US monthly jobs report fueled speculations that the Fed could start tapering its asset purchases later this year. Investors also seemed to have started pricing in the possibility that conditions for hiking interest rates by the Fed could be met as soon as late 2022.

This was reinforced by the ongoing move up in the US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond jumped back above the 1.30% threshold on Monday. This should continue to lend some support to the greenback. Apart from this, concerns about the economic fallout from the fast-spreading Delta variant of the coronavirus might further contribute to keeping a lid on any runaway rally for the perceived riskier kiwi.

Hence, any subsequent positive move runs the risk of fizzling out quickly. 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. Traders might further take cues from scheduled speeches by Atlanta Fed President Raphael Bostic and Richmond Fed President Thomas Barkin. This, along with the broader market risk sentiment, might provide some impetus to the NZD/USD pair.

Technical levels to watch