NZD/USD probes monthly highs in mid-0.6500s in holiday thinned trade as key US risk events loom

• NZD/USD came within a whisker of monthly highs in the mid-0.6500s in US holiday-thinned trade.
• USD long position squaring has continued to weigh on the buck, as NZD/USD traders brace for a busy data week.

NZD/USD came within a whisker of printing fresh highs for the month as recent downside in the US dollar extended on Monday, reaching into the upper 0.6550s before backing off to current levels in the 0.6530s. That means the pair is back to trading roughly flat on the day, which isn’t too surprising given a lack of trading volumes amid US market closures for the Memorial Day public holiday. Comments from the chief economist at the RBNZ on Monday, who cautioned that the bank’s recently unveiled hawkish rate guidance could be tempered if the economy underperforms expectations, were largely ignored.

Data released by the US Commodity Futures & Exchange Commission last Friday revealed that in the week ending last Tuesday, investors had continued to pare back on USD long positions and recent price action suggests this trend has continued, to the benefit of NZD/USD. The pair is now trading an impressive more than 5.0% above mid-month lows in the low 0.6200 area, with some traders citing an easing of expectations for Fed tightening in the latter part of 2022 and 2023 as inflation data increasingly shows signs of moderation (such as last week’s Core PCE numbers).

The rest of the week is set to be a busy one for NZD/USD traders given a barrage of upcoming tier one US data releases. May Conference Board Consumer Confidence survey data is out on Tuesday, May ISM Manufacturing PMI survey data and April JOLTs Job Openings data is out on Wednesday, May ADP Private Employment Change data is out on Thursday, while the official May labor market report is out on Friday.