NZD/USD inches back closer to overnight high, lacks follow-through as traders await US CPI

The NZD/USD pair attracted some dip-buying in the vicinity of the 0.6100 mark on Wednesday and inched back closer to the daily swing high. The pair was last seen trading around the 0.6130-0.6135 region and might now be looking to build on the overnight bounce from over a two-year low.

The US dollar was seen consolidating in a narrow band below a two-decade high touched on Tuesday amid signs of stability in the financial markets. This, in turn, offered some support to the risk-sensitive kiwi, which, earlier, had shrugged off the Reserve Bank of New Zealand's anticipated decision to hike interest rates by 50 bps.

That said, growing fears about a possible global recession should keep a lid on any optimistic move in the markets. Apart from this, expectations that the Fed would retain its aggressive policy tightening path to tame persistently high inflation should act as a tailwind for the greenback and cap gains for the NZD/USD pair.

It is worth recalling that the FOMC minutes released last week indicated that another 50 or 75 bps rate hike is likely at the July meeting. Policymakers also emphasized the need to fight inflation even if it results in an economic slowdown. Hence, the focus will remain glued to the release of the latest US consumer inflation figures.

The headline US CPI, due later during the early North American session, is seen rising to the 8.8% YoY rate in June from the 8.6% in the previous month. A stronger-than-expected print will reaffirm bets for faster rate hikes by the Fed, which, in turn, would be enough to provide a fresh lift to the USD and drag the NZD/USD lower.

Technical levels to watch