NZD/USD down below 0.6230s amid modest USD strength, rising wedge pattern

The NZD/USD pair once again fails near a technically significant 50-day Simple Moving Average (SMA) and comes under fresh selling pressure on Wednesday. Spot prices, however, remain depressed through the early US Session and currently trade just below mid-0.6230s, down less than 0.45% for the day.

The US Dollar (USD) gives up early gains and continues a two-day losing streak. The USD loses ground amid the Federal Reserve's less hawkish stance. The US central bank last week toned down its approach to reining in inflation and signalled that a pause to interest rate hikes was on the horizon in the wake of the recent turmoil in the banking sector.

Apart from this, the prevalent risk-on mood - as depicted by a generally positive tone around the equity markets - caps gains for the safe-haven Greenback and lends some support to the risk-sensitive Kiwi. The takeover of Silicon Valley Bank by First Citizens Bank & Trust Company calmed nerves about the contagion risk. This, coupled with the lack of any bad news from the banking sector over the past two weeks, boosts investors' confidence and helped reverse the recent negative sentiment in the markets.

The aforementioned fundamental backdrop supports prospects for some meaningful appreciating move for the NZD/USD pair. That said, repeated failures to make it through the very important 50-day SMA make it prudent to wait for strong follow-through buying before placing fresh bullish bets.

The technical picture is more bearish than bullish. The NZD/USD is correcting an established medium term downtrend which began at the start of February. After finding a floor at the March 8 lows, the pair has been correcting back in what could be a rising wedge price pattern.

A recent false break below the lower boundary line of the wedge pattern on March 27 failed to extend and kick-off a move lower, insterad retracting back inside the pattern. Now NZD/USD price is once again pressing down on the wedge's lower tramline at 0.6225, and a decisive break and close below, could signal a breakdown with a target at 0.6120 initially, (the 61.8% Fibo. extension of the height of the wedge) followed by 0.6060, the 100% extension, in a more bearish scenario. 

Traders now look to the US economic docket, featuring Pending Home Sales data. This, along with the US bond yields and the broader risk sentiment, might influence the USD and provide some impetus to the major.

Technical levels to watch