NZD / USD falls to three-day lows near 0.7050 level

• The NZD / USD witnesses profit-taking on Tuesday and retreats further from multi-year highs.
• A dovish USD price action could offer some support and help limit any significant declines.
• Investors are now looking for some boost in second-tier US economic data ahead of the FOMC meeting.

The pair NZD / USD moves lower during the European session on Tuesday and has fallen to three-day lows, around the 0.7060 region.

After a brief consolidation during the first half of trading action on Tuesday, the pair has seen some selling and has regressed further from the highest level since April 2018 set the day before. The pullback could only be attributed to some profit taking and is likely to remain limited amid dovish US dollar price action.

DXY Dollar Index remains weak near 2-1 / 2-year lows amid recent optimism about the launch of vaccines for the coronavirus. Apart of this, Expectations of additional US fiscal stimulus measures have put some additional pressure on the USD and they could help limit any further declines for the NZD / USD pair, at least for now.

Investors could also refrain from opening aggressive new positions and prefer to wait on the sidelines before the FOMC monetary policy meeting. In the run-up to the key risk event, markets have been weighing the possibility of the Fed further easing its monetary policy by expanding the bond purchase program.

Meanwhile, Tuesday’s U.S. economic calendar, featuring the Empire State Manufacturing Index’s second-tier releases and industrial production data, could generate some momentum. This, coupled with the news about the US stimulus, could influence USD price dynamics and generate some trading opportunities around the NZD / USD pair.

NZD / USD technical levels