NZD/USD recovers part of intraday losses, capped below 0.6250 amid modest USD strength

• The NZD/SUD is facing rejection near the 200-day SMA and runs into fresh selling on Wednesday.
• A good intraday rally in USD demand turns out to be a key factor putting pressure on the pair.
• The Fed’s less hawkish stance and positive risk tone constrain the USD and support the pair.

The pair NZD/USD it fails again near a technically significant 200-day SMA and comes under fresh selling pressure on Wednesday. The pair remains under pressure during the first half of the European session and currently trades just below 0.6250recovering slightly from the daily low of 0.6230 set earlier in the day.

The US dollar (USD) gains some positive traction and breaks a two-day losing streak, which in turn is seen as a key factor acting as a headwind for the NZD/USD pair. However, the USD rally lacks an obvious fundamental catalyst and remains constrained by the less hawkish stance of the Federal Reserve. In fact, last week the US central bank softened its approach to reining in inflation, signaling a pause in rate hikes was coming of interest following the recent turmoil in the banking sector.

Besides, risk appetite trend, reflected in the positive tone of equity markets, caps safe-haven USD gains, and gives some support to the NZD, sensitive to risk. The acquisition of Silicon Valley Bank by First Citizens Bank & Trust Company calmed nerves about the risk of contagion. This, coupled with the absence of bad news from the banking sector in the past two weeks, is boosting investor confidence and helping to reverse recent negative market sentiment.

The aforementioned fundamental background supports the prospects of some significant bullish movement for the NZD/USD pair. That being said, repeated failures to break above the important 200-day SMA make it prudent to wait for strong continuation buying before opening any further bullish positions. Data on pending home sales will be published in the US economic calendar. This, along with US bond yields and broader risk sentiment, could weigh on the dollar and give the pair a boost.

NZD/USD technical levels to watch