- The selling trend around the USD helps NZD/USD to regain positive traction on Tuesday.
- Fading expectations of a 100 basis point Fed rate hike in July continue to put pressure on the dollar.
- Recession fears and high US bond yields should cap USD losses and limit pair gains.
The pair NZD/USD attracts fresh buying near 0.6140 zone on Tuesday and turns to the upside. The pair maintains its buying tone throughout the European session, with the bulls looking for a sustained move above the 0.6200 level.
The American dollar failed to capitalize on the previous day’s bounce from a one-week low, and remains under pressure for the third day in a row amid diminishing odds of a 100 basis point Fed rate hike in July. In fact, several members of the FOMC declared last week that they were not in favor of a higher rate hike than expected by the markets after the publication of consumer inflation in the US. This, in turn, was considered a key factor that continued to weigh on the dollar and offered some support to the NZD/USD pair.
Despite lowering expectations for a more aggressive Fed, Investors seem convinced that the recent rise in US consumer inflation will force the Fed to make a further rate hike later in the year. This was reinforced by high yields on US Treasuries, which should act as a tailwind for the dollar. Also, rising fears of a global recession should cap any significant decline in the safe-haven US dollar, and cap gains in the perceived riskier NZDwhich justifies the caution of the aggressive bulls.
Therefore, it would be prudent to wait for a continuation strong buying above the 0.6200 round level before confirming that the NZD/USD pair has formed a short-term bottom. This, in turn, would set the stage for an extension of the recent bounce from the 0.6060 region. Market participants now await the US housing market data, with the release of building permits and housing starts, to give the pair a further boost at the start of the American session.
NZD/USD technical levels to watch
Source: Fx Street
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