- The NZD / USD extends its side consolidation price action for the second day in a row.
- Investors now seem reluctant to open aggressive positions before the FOMC decision.
The pair NZD / USD lacks a firm directional bias and remains trapped within a narrow trading range below the 0.7200 level at the start of the European session on Wednesday.
The pair has been unable to capitalize on its gains recorded on the first day of the current week and has been swinging within a range for the past two trading days. Investors have become Cautious Following Temporary Suspension of Oxford / AstraZeneca Coronavirus Vaccine in Europe. This, in turn, has been seen as a key factor limiting any significant rise to the higher perceived risk NZD.
On the other hand, the US dollar continues to benefit from the prospects for a faster US economic recovery from the pandemic and largely ignored Tuesday’s disappointing US retail sales figures. Apart from this, the recent rally in US Treasury yields has further benefited the dollar and has helped to limit the NZD / USD pair below the round level of 0.7200.
The optimistic economic outlook for the United States, bolstered by the passage of a massive stimulus package, has been fueling speculation about a possible spike in US inflation. This, in turn, has raised doubts that the Fed would keep interest rates ultra-low for a longer period and it has pushed the yield on the US government 10-year bond above 1.60%, close to the highs of more than a year hit last week.
Having said that, expectations that the Fed might take action to stem any further increase in the cost of borrowing in the long run they have acted as a hindrance to US bond yields. This appears to be the only factor that has prevented the USD bulls from opening aggressive positions and has offered some support to the NZD / USD pair. Therefore, attention will remain on the FOMC’s monetary policy decision, scheduled to be announced during today’s US session.
Apart from this, Thursday’s publication of the New Zealand’s quarterly GDP report will play a key role in influencing the NZD / USD pair and helping investors determine the next directional move.
NZD / USD technical levels
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