NZD/USD drops to fresh one-week lows, approaches 0.6900 mark ahead of FOMC

The NZD/USD pair maintained its offered tone through the early North American session and dropped to fresh one-week lows, around the 0.6925 region in the last hour.

The pair extended the previous day's rejection slide from the key 0.7000 psychological mark and witnessed some follow-through selling for the second successive session on Wednesday. A combination of factors assisted the US dollar to regain positive traction, which, in turn, exerted some downward pressure on the NZD/USD pair.

Investors remain worried about the potential economic fallout from the fast-spreading Delta variant of the coronavirus. This was evident from the prevalent cautious mood around the equity markets, which was seen as a key factor that acted as a tailwind for the safe-haven USD and drove some flows away from the perceived riskier kiwi.

Apart from this, a goodish pickup in the US Treasury bond yields further underpinned the greenback amid some repositioning trade ahead of the highly-anticipated FOMC monetary policy decision. Given a surprise hawkish shift from the Fed in June, market players will look for fresh clues about the timing of tapering amid surging inflation in the US.

The announcement will be followed by the post-meeting press conference, where comments by Fed Chair Jerome Powell will play a key role in influencing the near-term USD price dynamics. This, along with developments surrounding the coronavirus saga, should assist investors to determine the next leg of a directional move for the NZD/USD pair.

Technical levels to watch