NZD/USD remains on the defensive below 0.6300 mark, lacks follow-through selling

The NZD/USD pair struggles to capitalize on the previous day's positive move and attracts some selling in the vicinity of the 0.6300 mark on Tuesday. The pair edges lower through the early European session and drops to a fresh daily low, around the 0.6270 region in the last hour.

Growing worries about a global economic downturn, along with US-China tensions over Taiwan, keep a lid on the recent optimistic move in the markets and act as a headwind for the risk-sensitive kiwi. That said, a softer tone surrounding the US dollar offers some support to the NZD/USD pair and should help limit any deeper losses.

The flight to safety continues to exert downward pressure on the US Treasury bond yields, which, in turn, is seen undermining the greenback. That said, speculations that the Fed would stick to its aggressive policy tightening path, bolstered by Friday's upbeat US jobs report, support prospects for the emergence of some USD dip-buying.

In fact, the markets are pricing in around 70% chances that the Fed would hike interest rates by 75 bps at its September meeting. The bets were reaffirmed by Fed Governor Michelle Bowman's remarks on Saturday, saying that the US central bank should consider more 75 bps hikes at coming meetings to bring inflation back down.

Hence, the market focus would remain glued to the latest US consumer inflation figures, due for release on Wednesday. The US CPI report would be looked upon for fresh clues about the Fed's policy path. This, in turn, would play a key role in influencing the near-term USD price dynamics and determining the near-term trajectory for the NZD/USD pair.

In the meantime, traders might prefer to move on the sidelines amid absent relevant market-moving US economic releases from the US. Even from a technical perspective, the recent range-bound price action witnessed over the past two weeks or so points to indecision among traders and warrants some caution before placing aggressive bets around the NZD/USD pair.

Technical levels to watch