- NZD / USD marks a solid rebound from multi-month lows following the RBNZ’s monetary policy decision.
- A subdued demand for USD remains supportive, while nervousness over COVID-19 limits any further gains in the pair.
- Investors await the release of the FOMC meeting minutes for further directional momentum.
The pair NZD / USD it has failed to capitalize on its solid intraday bounce from multi-month lows and has quickly retraced around 35 pips from daily highs. At the time of writing, the pair remains around the 0.6915 level, practically unchanged on the day.
The pair has seen some selling during the Asian session and has fallen to the lowest level since November 2020 after the Reserve Bank of New Zealand (RBNZ) announced its latest monetary policy decision. The RBNZ decided to keep the cash rate unchanged at 0.25% in light of the new COVID cases in New Zealand and the imposition of new restrictions.
The intraday decline, however, has turned out to be short-lived and quickly bought in after the RBNZ governor, Adrian Orr, will leave the door open for a rate hike in the near future. In fact, investors are now setting a 60% chance of a rate hike in October, which, in turn, helps the NZD / USD pair attract some buying near the 0.6870-65 region.
The NZD / USD pair has recovered more than 80 pips from the daily lows, although it has failed to capitalize on the move beyond 0.6950. Investors remain concerned about the potential economic consequences of the fast-spreading Delta variant of the coronavirus. This has been seen as the only factor acting as a headwind for the higher perceived risk NZD.
Secondly, the US dollar has been seen consolidating the strong movement of the previous day up amid signs of stability in the stock markets. This should lend some support to the NZD / USD pair as the market focus now shifts to the release of the FOMC monetary policy meeting, to be held later during the American session on Wednesday.
Investors will be looking for signs of when the Fed is likely to start reducing its asset purchases. This will play a key role in influencing short-term USD price dynamics and will provide new directional momentum to the NZD / USD pair.
Technical levels to observe
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