NZD/USD struggles to capitalize on its modest uptick beyond 0.6100 on stronger USD

• NZD/USD regains positive traction on Monday, albeit lacks follow-through.
• A positive tone around the US equity futures benefits the risk-sensitive Kiwi.
• Bets for more Fed rate hikes revive the USD demand and act as a headwind.

The NZD/USD pair attracts some dip-buying on the first day of a new week and sticks to its modest intraday gains through the early part of the European session. The pair is currently placed around the 0.6100 round figure, albeit lacks bullish conviction and remains well within Friday's broader trading range.

In the absence of any fresh fundamental trigger, a generally positive tone around the US equity futures is seen as a key factor lending some support to the risk-sensitive Kiwi. The upside for the NZD/USD pair, however, remains capped in the wake of the emergence of fresh US Dollar (USD) buying, bolstered by the prospects for further policy tightening by the Federal Reserve (Fed).

Despite a slight disappointment from the headline NFP, solid wage growth and an unexpected downtick in the jobless rate raised odds of a soft landing for the US economy. Moreover, the continued tightness in the labour market kept the door for one more 25 bps Fed rate hike move in September or November wide open. This leads to a fresh leg up in the US Treasury bond yields and underpins the USD.

Meanwhile, concerns that the post-COVID recovery in China - the world's second-largest economy - is losing steam overshadows the latest optimism over additional stimuls. This might further contribute to capping any meaningful appreciating move for antipodean currencies, including the New Zealand Dollar (NZD), warranting caution before placing fresh bullish bets around the NZD/USD pair.

Moving ahead, there isn't any relevant market moving economic data due for release from the US on Monday. Hence, traders will look to speeches by influential FOMC members for cues about the Fed's future rate-hike path. This, along with the US bond yields and the broader risk sentiment, will drive the USD demand and allow traders to grab short-term opportunities around the NZ/USD pair.

Technical levels to watch