- NZD/USD falls to its lowest level since April 2020 amid sustained USD buying interest.
- US Bond Yields Pullback, Risk Appetite Limits Dollar and Pair Losses.
- Investors now appear to be sitting on the sidelines and awaiting the crucial FOMC policy decision.
The NZD/USD pair recovers a few points from its lowest level since April 2020 touched in the last hour and is currently in neutral territory around the 0.5885 region. That said, any meaningful recovery still looks elusive as investors brace for another Federal Reserve rate hike.
The stronger US CPI report released last week reaffirmed expectations that the US central bank will continue to tighten monetary policy at a faster pace. This remains support for a strong US dollar follow-up move to a fresh 20-year high, which, in turn, should continue to act as a headwind for the NZD/USD pair.
That said, the softer tone surrounding US Treasury Yields and a generally positive risk tone keep a cap on any further gains for the safe-haven dollar. Aside from this, oversold conditions on short-term charts offer some support for the risk-sensitive kiwi and help limit losses for the NZD/USD pair.
Aside from this, the intraday bounce could be attributed to some repositioning trading ahead of the expected FOMC policy decision, to be announced later in the US session. The Fed is expected to maintain its aggressive tightening policy and raise interest rates by at least 75 basis points.
Apart from this, the focus will be on the updated economic projections and the dot plot. Additionally, Fed Chairman Jerome Powell’s remarks at the post-meeting press conference will be taken into account for clues on future rate hikes. This, in turn, will weigh on the dollar and provide a further directional boost to the NZD/USD pair.
Technical levels to watch
Source: Fx Street
