NZD/USD struggles near daily lows, below mid-0.6900s

• NZD/USD witnessed fresh selling on Tuesday and snapped three days of the winning streak.
• Resurgent USD demand, the cautious mood exerted some downward pressure on the major.
• Investors now look forward to the US ISM Services PMI for some short-term trading impetus.

The NZD/USD pair remained depressed through the early European session and was last seen hovering just a few pips above daily lows, around the 0.6935-40 region.

A combination of factors failed to assist the NZD/USD pair to capitalize on its recent gains recorded over the past three trading sessions, instead prompted some fresh selling on Tuesday. The US dollar was back in demand amid rising bets for an early policy tightening by the Fed. Apart from this, a softer risk tone further collaborated to drive flows away from the perceived riskier kiwi.

Investors seem convinced that the Fed would begin rolling back its massive pandemic-era stimulus as soon as November. The markets might have also started pricing in the possibility of an interest rate hike in 2022. This, along with a modest uptick in the US Treasury bond yields, continued acting as a tailwind for the greenback, which, in turn, exerted some downward pressure on the NZD/USD pair.

Meanwhile, worries that a runaway rally in crude oil/energy prices will stoke inflation and derail the global economic recovery tempered investors' appetite for perceived riskier assets. This was evident from a generally weaker sentiment around the equity markets, which factor benefitted the safe-haven greenback and contributed to the offered tone surrounding the NZD/USD pair.

With the latest leg down, the NZD/USD pair, for now, seems to have snapped three successive days of the winning streak and stalled the recent bounce from the 0.6860 region, or over one-month lows. Market participants now look forward to the US economic docket, highlighting the release of ISM Services PMI for a fresh impetus later during the early North American session.

Apart from this, the US bond yields and a scheduled speech by Fed Governor Randal Quarles might influence the USD price dynamics. Traders will further take cues from the broader market risk sentiment for some short-term opportunities around the NZD/USD pair.

Technical levels to watch