NZD / USD extends intraday bounce from yearly lows and recovers above 0.6750

• NZD / USD achieves a modest recovery from a new annual low touched earlier this Wednesday.
• A modest USD weakness and positive risk tone offer support to the higher perceived risk NZD.
• The hike is likely to remain limited ahead of the expected monetary policy decision from the FOMC.

The pair NZD / USD has built on its constant intraday recovery movement, from a new annual low touched earlier this Wednesday, and has recovered above the 0.6750 region during the European session.

The US dollar struggled to capitalize on the previous day’s positive move to a week high and moved lower during the early part of Wednesday. This, in turn, was seen as a key factor that helped the NZD / USD pair to reverse an intraday decline to the 0.6725 region, or the lowest level since November 2020.

Apart of this, a slightly positive tone around the stock markets further benefited the NZD higher perceived risk, although any significant rally for the NZD / USD pair still seems elusive. Concerns about the economic consequences of the spread of the new Omicron variant of the coronavirus should limit any optimism.

What’s more, The growing acceptance that the Fed would adopt a more aggressive policy response to contain stubbornly high inflation should act as a tailwind for the USD. Therefore, the market focus will remain on the outcome of the FOMC’s two-day monetary policy meeting, scheduled to be announced later this Wednesday.

Before the key event, investors might be reluctant to open aggressive bullish positions around the NZD / USD pair. This also justifies some caution before confirming that the pair has bottomed out in the short term. Investors are now awaiting the release of US retail sales data for some boost at the start of the American session today.

NZD / USD technical levels