NZD/USD steadily climbs back to 0.7215 region, lacks follow-through
|- Some cross-driven strength stemming from AUD/NZD extended support to NZD/USD.
- COVID-19 jitters, a pickup in the USD demand should keep a lid on any strong gains.
- Investors look forward to the latest FOMC decision for a fresh directional impetus.
The NZD/USD pair managed to bounce over 25 pips from the Asian session swing lows and climbed to fresh daily tops, around the 0.7215 region in the last hour.
The pair attracted some dip-buying near the 0.7188 level on Wednesday and for now, seems to have stalled the previous day's pullback from the highest level since March 18. The uptick lacked any obvious fundamental catalyst and could be solely attributed to some cross-driven strength stemming from the softer Australian CPI-led decline in the AUD/NZD pair.
That said, a combination of factors might hold bulls from placing aggressive bets and keep a lid on any strong gains for the NZD/USD pair. Worries that surging COVID-19 infections in India and Japan could derail the global economic recovery weighed on investors' sentiment. This, in turn, should act as a headwind for the perceived riskier kiwi.
Meanwhile, a generally softer tone around the equity markets assisted the US dollar to recover further from multi-week lows touched earlier this week. The greenback was further supported by some strong follow-through move up in the US Treasury bond yields. This was seen as another factor that should further contribute to capping the upside for the NZD/USD pair.
Moreover, investors might also refrain from placing aggressive bets, rather prefer to wait on the sidelines ahead of the latest FOMC monetary policy update. The US central bank is scheduled to announce its decision later during the US session and is widely anticipated to leave monetary policy settings unchanged at the end of a two-day meeting on Wednesday.
That said, rising inflation expectations might force the Fed to start laying the groundwork for a future policy tightening. Hence, the key focus will be on Fed Chair Jerome Powell's comments at the post-meeting press conference. Any hawkish tilt should provide a strong lift to the buck and set the stage for some meaningful weakness around the NZD/USD pair.
Technical levels to watch
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