NZD/USD climbs to 0.7225 area, inching back closer to multi-year tops

• NZD/USD caught fresh bids on the first day of 2021 amid sustained USD selling bias.
• The risk-on environment was seen as a key factor weighing on the safe-haven USD.
• Bulls seemed rather unaffected by Monday’s release of Chinese Manufacturing PMI.

The NZD/USD pair edged higher through the early European session and refreshed daily tops, around the 0.7225 region in the last hour.

Following the previous session's intraday pullback of around 60 pips, the pair caught some fresh bids on the first trading day of 2021 and remains well within the striking distance of multi-year tops. The underlying upbeat market mood continued weighing on the safe-haven US dollar and was seen as a key factor that benefitted the perceived riskier kiwi.

The mass distribution of vaccines, to a larger extent, helped offset worries about the new faster-spreading coronavirus strain. This, along with hopes for a strong global economic recovery, remained supportive of the risk-on environment. Adding to this, expectations that the Fed will keep rates lower for a longer period and kept the USD bulls on the defensive.

Meanwhile, a goodish pickup in the US Treasury bond yields also did little to provide any respite to the greenback or hinder the NZD/USD pair's intraday uptick. Bulls also seemed rather unaffected and largely shrugged off Monday's unimpressive Chinese Manufacturing PMI, which unexpectedly fell to 53.0 in December from 54.9 previous. Market participants now.

With the USD price dynamics turning out to be an exclusive driver of the NZD/USD pair's movement, market participants now look forward to the final US Manufacturing PMI for a fresh impetus. Apart from this, developments surrounding the coronavirus saga should influence the broader risk sentiment and produce some trading opportunities around the NZD/USD pair.

Technical levels to watch