NZD/USD flirts with session lows, just below 0.7000 mark

• NZD/USD met with some supply on Wednesday amid sustained USD buying interest.
• Rising bets for an earlier Fed taper, rallying US bond yields underpinned the greenback.
• COVID-19 jitters further weighed on the perceived riskier kiwi ahead of the US CPI print.

The NZD/USD pair dropped to the lower end of its intraday trading range heading into the European session, with bears looking to extend the slide further below the key 0.7000 psychological mark.

The pair struggled to capitalize on the previous day's goodish bounce of over 40 pips from one-week lows and an early uptick, instead met with some fresh supply near the 0.7015 region on Wednesday. A combination of factors continued underpinning the US dollar, which, in turn, prompted some selling around the NZD/USD pair.

Investors now seem to have brought forward the likely timing for policy tightening by the Fed amid signs of substantial further progress in the labor market recovery. The Fed officials have also started to guide the market towards an early tapering of the massive pandemic-era stimulus and higher interest rates as soon as 2022.

The repricing of an early move by the Fed pushed the yield on the benchmark 10-year US government bond beyond the 1.36% threshold, or the highest level since mid-July. Apart from this, COVID-19 jitters further benefitted the greenback's relative safe-haven status and drove flows away from perceived riskier currencies, including the kiwi.

Investors remain worried about the potential economic fallout from the spread of the highly contagious Delta variant of the coronavirus. This, to a larger extent, offset the optimism over the passage of a $1 trillion US infrastructure bill on Tuesday and weighed on investors sentiment, which was evident from a cautious mood around the equity markets.

The focus now shifts to the release of the latest US consumer inflation figures, due later during the early North American session. The data will influence market expectations about the next policy move by the Fed, which will drive the USD in the near term and assist investors to determine the next leg of a directional move for the NZD/USD pair.

Technical levels to watch