NZD/USD sticks to intraday gains, upside seems limited ahead of FOMC minutes
|- NZD/USD caught some fresh bids on Wednesday following the previous day’s sharp pullback.
- RBNZ rate hike expectations continued lending some support amid a subdued USD demand.
- The market focus remains on Wednesday’s release of the FOMC June policy meeting minutes.
The NZD/USD pair maintained its bid tone through the first half of the European session and climbed to fresh daily tops, around 0.7040 region in the last hour.
Having shown some resilience below the key 0.7000 psychological mark, the NZD/USD pair managed to regain some positive traction on Wednesday and was supported by a combination of factors. Investors brought forward their expectations for a rate hike by the RBNZ after a business survey in New Zealand showed a sharp improvement in confidence. This, in turn, was seen as a key factor that acted as a tailwind for the kiwi.
Apart from this, a subdued US dollar price action provided an additional boost to the NZD/USD pair and remained supportive of the intraday move up. Investors now seem convinced that the Fed will wait for a longer period before tapering its asset purchases or raising interest rates. This, along with an extension of the recent fall in the US Treasury bond yields, failed to assist the USD to capitalize on the overnight strong gains.
That said, the prevalent cautious mood – amid concerns about the spread of the highly contagious Delta variant of the coronavirus – extended some support to the safe-haven greenback. Market participants might also refrain from placing any aggressive bets, rather prefer to wait on the sidelines ahead of Wednesday's release of the FOMC June meeting minutes. This might keep a lid on any runaway rally for the NZD/USD pair, at least for now.
Given that the Fed brought forward its timetable for the first post-pandemic interest rate hike, the minutes will now be looked upon for fresh clues about the central bank's policy outlook. This will play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to the NZD/USD pair. In the meantime, the broader market risk sentiment might produce some short-term trading opportunities.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.