- The NZD / USD draws some lower levels near the 0.6985-80 region on Monday.
- The optimistic expectations of the Fed continue to benefit the USD and limit the pair’s gains.
- The market is focused on the upcoming monetary policy meeting of the RBNZ on Wednesday.
The pair NZD / USD has recovered from an intraday decline, although it has lacked continuation and, for now, appears to have stabilized near the key psychological level of 0.7000.
The pair attracted some buying near the monthly low and quickly rallied around 20 pips from the 0.6985-80 zone previously touched during the Asian session on Monday. The rally lacked an obvious fundamental catalyst and remained limited amid strong bullish sentiment around the US dollar.
In fact, the DXY US Dollar Index held firm near the highest level since July 2020 and continued to receive support from growing market expectations of an early tightening of monetary policies by the Fed.
Fed fund futures indicate the possibility of an eventual Fed rate hike by July 2022 and a high probability of another increase for November. The speculation was further fueled by comments from Fed Governor Christopher Waller, who said that the US central bank should accelerate the pace of adjustment to give more room for maneuver to raise interest rates.
That said, the rising expectations for another rate hike by the Reserve Bank of New Zealand (RBNZ) acted as a tailwind for the NZD / USD pair. Therefore, the market will focus on the upcoming RBNZ monetary policy meeting on Wednesday. Aside from this, the minutes of the FOMC meeting will help determine the short-term trajectory for the pair.
In the meantime, investors could take cues from US bond yields and broader market risk sentiment. This, coupled with the scheduled release of existing US home sales data, could influence USD price dynamics and provide some boost to the NZD / USD pair, although investors would refrain from opening aggressive positions. .
NZD / USD technical levels