- The NZD / USD witnessed some follow-up selling for the second consecutive session on Wednesday.
- As US bond yields rallied, risk aversion benefited the dollar as a safe haven and put pressure.
- Investors eagerly await the FOMC’s monetary policy decision before making further directional bets.
The pair NZD / USD it maintained its offered tone during the early days of the American session and fell to fresh one-week lows, around the 0.6925 region in the last hour.
The pair extended the previous day’s rejection slide from the key psychological level of 0.7000 and witnessed some follow-up selling for the second consecutive session on Wednesday. A combination of factors helped the US dollar regain positive traction, which in turn put some downward pressure on the NZD / USD pair.
Investors remain concerned about the potential economic consequences of the fast-spreading Delta variant of the coronavirus. This was evident by the risk-off climate in equity markets, which was seen as a key factor that acted as a tailwind for the safe-haven dollar and pushed away some flows of the kiwi perceived as riskier.
Aside from this, a good recovery in US Treasury yields further sustained the dollar amid a repositioning ahead of the long-awaited FOMC monetary policy decision. Given a surprising Fed turnaround in June, market players will be looking for new clues as to when to downsize amid rising inflation in the US.
The announcement will be followed by the post-meeting press conference, where comments from Fed Chairman Jerome Powell will play a key role in influencing short-term USD price dynamics. This, along with developments related to the coronavirus saga, should help investors determine the next leg of a directional move for the NZD / USD pair.
Technical levels
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