NZD/USD sticks to modest intraday gains below 0.6100 mark, lacks follow-through

The NZD/USD pair gains some positive traction for the second successive day on Tuesday and maintains its bid tone through the early part of the European session. Spot prices, however, lack bullish conviction and remain below the 0.6100 round figure, warranting some caution before positioning for an extension of the recent bounce from the YTD low touched last week.

The US Dollar (USD) trades with a mild negative bias amid expectations for an imminent pause in the Federal Reserve's (Fed) rate-hiking cycle and turns out to be a key factor lending some support to the NZD/USD pair. In fact, the current market pricing indicates a greater chance that the US central bank will leave interest rates unchanged at the end of a two-day policy meeting on June 14. The bets were reaffirmed by the disappointing release of the US ISM Services PMI on Monday, which fell to 50.3 in May.

This comes on the back of last week's dovish rhetoric from several FOMC officials and reaffirmed market bets that the US central bank will skip hiking interest rates next week. The expectations, meanwhile, led to the overnight sharp intraday slide in the US Treasury bond yields and keeps the USD bulls on the defensive, which, in turn, lends support to the NZD/USD pair. That said, the cautious market mood limits losses for the safe-haven buck and caps any meaningful upside for the risk-sensitive Kiwi.  

Apart from this, the Reserve Bank of New Zealand's (RBNZ) explicit signal that it was done with its most aggressive hiking cycle since 1999 might hold back bulls from placing aggressive bets around the NZD/USD pair. Moving ahead, there isn't any relevant market-moving economic data due for release from the US, leaving the buck at the mercy of the US bond yields. This, along with the broader risk sentiment, could allow traders to grab short-term opportunities around the major.

Technical levels to watch