NZD/USD remains depressed below 0.6200 mark, positive risk tone could limit losses

• NZD/USD oscillates in a narrow trading band and is influenced by a combination of factors.
• A positive risk tone lends some support to the risk-sensitive Kiwi amid subdued USD demand.
• The fundamental backdrop warrants caution before placing any bullish bets around the pair. 

The NZD/USD pair struggles to gain any meaningful traction on the first day of a new week and seesaws between tepid gains/minor losses through the first half of the European session. The pair currently trades just below the 0.6200 mark and seems poised to extend the pullback from the vicinity of the 0.6300 round figure, or its highest level since February 16 touched last Thursday.

A combination of factors fails to assist the US Dollar (USD) to build on its recent recovery move from a multi-week low and lends some support to the NZD/USD pair. News that First Citizens Bank & Trust Company will buy all of Silicon Valley Bank's deposits and loans from the Federal Deposit Insurance Corporation (FDIC) has calmed market nerves about contagion risk. Moreover, reports that US authorities are in the early stage of deliberation about expanding emergency lending facilities has boosted investors' confidence. This is evident from a fresh leg up in the US equity futures, which, along with the Federal Reserve's signal last week that it might soon pause the rate-hiking cycle, act as a headwind for the safe-haven buck.

Easing fears of a full-blown banking crisis, meanwhile, leads to a further strong follow-through recovery in the US Treasury bond yields. Apart from this, Russian President Vladimir Putin's decision to place tactical nuclear weapons in Belarus acts as a tailwind for the Greenback and keeps a lid on any meaningful upside for the risk-sensitive Kiwi, at least for the time being. This, in turn, warrants some caution for the NZD/USD bulls. Moreover, last week's failure near a technically significant 200-day Simple Moving Average (SMA) makes it prudent to wait for strong follow-through buying before placing fresh bullish bets around the major and positioning for any meaningful appreciating move in the near term.

There isn't any relevant market-moving economic data due for release from the US on Monday, leaving the USD at the mercy of the US bond yields. Apart from this, the broader risk sentiment might influence the safe-haven Greenback and provide some impetus to the NZD/USD pair. The market focus, however, will remain glued to the release of the Fed's preferred inflation gauge, the Core PCE Price Index, due on Friday.

The technical picture looks increasingly bearish with the NZD/USD's breakdown out of a rising wedge pattern that began forming on March 8. Price, which has hithertoo remained confined within the parameters of the wedge, is currently breaking out below the pattern's lower boundary line for the first time. If the chart continues to print bearish candles on the intraday charts and then closes the day below the wedge's baseline at 0.6203, it will provide confirmation of a breakout lower. Such a breakdown would likely reach, at least as low as the 0.6100 March lows, possible even lower. 

Technical levels to watch