- NZD/USD regains some positive traction on Tuesday amid a modest drop in the USD.
- Positive risk tone and lower US bond yields keep USD bulls on the back foot.
- The rise seems limited pending the US CPI on Tuesday and the FOMC on Wednesday.
The NZD/USD receive new purchases on tuesday and go back up above the 0.6400 level during the first part of the European session.
A combination of factors is attracting some selling around the US dollar, which in turn is seen as supporting the NZD/USD pair. Optimism about easing COVID-19 restrictions in China remains supportive of the recent recovery in risk appetite. Furthermore, uncertainty about the Fed’s rate hike path acts as a headwind for US Treasury yields and keeps USD bulls on the defensive.
Meanwhile, the NZD/USD upside is likely to remain limited as traders may refrain from taking aggressive positions ahead of this week’s key US data/events. During the North American session will be published CPI consumer inflation figures for November. However, attention will remain focused on the outcome of the two-day Federal Open Market Committee (FOMC) monetary policy meeting, which will be held on Wednesday.
Market participants seem convinced that the Fed will slow the pace of its rate hike cycle and expect a relatively minor rise of 50 basis points. That being said, the positive US macroeconomic data has fueled the Speculation that the US central bank could raise rates more than expected. Therefore, investors will look for clarity on the Fed’s policy outlook, which should influence near-term USD price dynamics.
Ahead of key data and central bank risks, the fundamental background warrants caution before positioning for further appreciation. Even from a technical perspective, the 0.6420-0.6425 zone seems to have emerged as an immediate barrier. It is closely followed by the 0.6440-0.64450 zone, ie the highest level since mid-August, which should act as a turning point for the NZD/USD pair.
Technical levels to watch
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
