From a one-month low reached last Friday, NZD/USD has staged a fair recovery. The PBoC takes action to further relax policy and supports antipodeans, including the kiwi. Any significant upward movement for the pair is limited by persistent USD buying and recession fears.

On Monday, the NZD/USD pair makes some progress and breaks a five-day losing streak to close at a one-month low, close to the 0.6165 area touched last week. Despite appearing to struggle to take advantage of the move, the pair maintains its bid tone throughout the middle of the European session and is currently trading around the 0.6200 level.

It turns out that one of the main factors that helps antipodeans, including the kiwi, is the People’s Bank of China (PBoC), which cut lending rates for the second time in two weeks to stimulate the economy. Aside from this, the attempted recovery is still constrained by ongoing US dollar buying and lacks any clear fundamental catalyst.

Rising US Treasury bond yields continue to be supported by growing expectations that the Fed will stick to its course of tightening policy in order to control inflation. The US dollar continues to be supported by the benchmark 10-year US government bond, which is currently holding just below the 3.0% threshold and contributing to the general risk-off sentiment.

The market’s mood is still precarious as concerns about a global economic slowdown grow. In addition, anxiety over the COVID lockdowns’ impact on China’s economy causes a new wave of risk aversion trading. This is perceived as yet another element helping the safe-haven dollar while limiting gains for the risk-averse kiwi.

The fundamental environment makes it prudent to hold off on positioning for any further gains until there is strong follow-through buying before concluding that the NZD/USD pair has formed a near-term bottom. The general risk sentiment may affect the USD and give the major some momentum in the absence of any market-moving US economic data.