NZD/USD clings to modest intraday gains and holds above 0.6100

• NZD/USD regains some positive traction on Tuesday amid some minor USD weakness.
• China’s problems with COVID-19 and signals from the Fed should benefit the dollar.
• Traders also look reluctant ahead of Wednesday’s RBNZ and lsd FOMC minutes.

The pair NZD/USD attracts some buying on Tuesday and reverses some of the previous day’s losses to levels below 0.6100. The pair is holding on to its modest gains at the start of the European session and is currently trading near the upper end of the daily range, around the 0.6120 region.

The US dollar is struggling to gain significant traction and is seen consolidating the previous day’s strong move to a 1-week high, which in turn offers some support to the NZD/USD pair. Having said that, dovish sentiment prevailing in equity markets acts as a tailwind for safe-haven USD and caps any further gains for the risk-sensitive NZD, at least for now.

investors follow Concerned about possible economic difficulties arising from a new outbreak of COVID-19 in China and the imposition of new closures in some cities. In addition, China’s National Health Commission (NHC) insists on maintaining the zero-covid policy. This, together with the risk of a new escalation in the conflict between Russia and Ukrainecontinues to weigh on risk sentiment.

Meanwhile, doubts about the narrative of a spike in inflation and hawkish signals from several Fed officials suggest the US central bank may still be a long way from pausing its tightening cycle about politic. This, in turn, favors dollar bulls and should also help cap the NZD/USD pair. Traders may also prefer to stay on the sidelines and wait for a new catalyst from this week’s key events.

It is planned that the Reserve Bank of New Zealand (RBNZ) announce its monetary policy decision on Wednesday, followed by the release of the FOMC meeting minutes. This, in turn, will determine the next directional move for the NZD/USD pair. Meanwhile, traders will look to Cleveland Fed President Loretta Mester’s scheduled speech for some momentum on Tuesday.

NZD/USD technical levels