- The NZD / USD makes a nice bounce from the support of the 50-day SMA near the 0.7000 level.
- Risk appetite weighs on the safe-haven USD and benefits the higher perceived risk NZD.
- The optimistic expectations of the Fed and the rebound in US bond yields could help limit losses around the USD and limit the pair’s gains.
The pair NZD / USD extends its good intraday bounce from three-week lows and rises back to the 0.7050 region during the first half of the European session on Tuesday.
The pair has found decent support near the 50-day SMA, around the key psychological level of 0.7000, and he had a good rebound on Tuesday, breaking three consecutive days of losing streak. Risk appetite in the markets has weighed on the safe-haven U.S. dollar, which in turn has been seen as a key factor that has benefited the NZD with the highest perceived risk.
Having said that, fears about contagion risk from China’s Evergrande troubles should limit optimism. Aside from this, expectations of an imminent Fed announcement and a good rally in US Treasury yields should act as a tailwind for the USD. This, in turn, could limit any further gains for the NZD / USD pair.
Investors could also refrain from opening aggressive positions and prefer expect a new catalyst from the outcome of a two-day FOMC meeting starting this Tuesday. This makes it prudent to wait for some continuation buying before confirming that the recent pullback from the highest level since June 11 is over.
It is planned that the Fed announces its monetary policy decision during the US session on Wednesday and investors will be looking for clues as to the likely timing of the downsizing plan. Apart from this, the latest economic projections and the dot chart will play a key role in influencing the USD price dynamics and helping determine the short-term movement for the NZD / USD pair.
In the meantime, traders could continue to take cues from the broader market risk sentiment in order to seize some short-term opportunities. Tuesday’s relatively empty US economic calendar, which includes second-tier data on the housing sector, could do little to provide a significant boost to the NZD / USD pair.
NZD / USD technical levels