- Some strength driven by the AUD / NZD cross offers support to the NZD / USD on Wednesday.
- Concerns about the coronavirus and a rebound in USD demand should limit the pair’s strong gains.
- Investors await the latest FOMC decision for new directional momentum.
The pair NZD / USD has managed to bounce more than 25 pips from the lows of the Asian session and has risen to new daily highs, around the 0.7215 region, midway through the European session on Wednesday.
The pair has captured some buying near the 0.7188 level on Wednesday and, for now, the previous day’s pullback from the highest level since March 18 appears to have been halted. The rally lacks an obvious fundamental catalyst and could only be attributed to some force driven by the AUD / NZD cross following the release of the Australian CPI.
That said, a combination of factors could prevent the bulls from initiating aggressive positions and limit the strong gains of the NZD / USD pair. Concerns that rising COVID-19 infections in India and Japan could derail the global economic recovery have weighed on investor sentiment. This, in turn, should act as a headwind for the higher perceived risk NZD.
In the meantime, a softer tone in stock markets has helped the US dollar to rebound further from the multi-week lows touched earlier this week. The dollar has also been supported by a strong continuing upward movement in US Treasury yields. This has been seen as another factor that should further contribute to limiting the rise of the NZD / USD pair.
Furthermore, investors can also refrain from opening aggressive positions and they prefer to wait on the sidelines before the latest FOMC monetary policy update. The US central bank is expected to announce its decision later in the American session today and is expected to leave the monetary policy setting unchanged.
That said, rising inflation expectations could force the Fed to begin laying the groundwork for a future tightening of monetary policy. Therefore, the focus of attention will be on Fed Chairman Jerome Powell’s comments at the post-meeting press conference. Any bullish tilt should provide a strong boost to the US dollar and set the stage for significant weakness around the NZD / USD pair.
NZD / USD technical levels
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