NZD/USD surrenders recovery gains, back near YTD lows as FOMC looms

   •  Fails to capitalize on early recovery move amid a modest USD rebound.
   •  Retracing US bond yields/bullish commodity prices does little to support.
   •  The highly anticipated FOMC decision to help determine the near-term trajectory.

The NZD/USD pair surrendered majority of its early modest recovery gains and has retreated back closer to YTD lows, around the key 0.70 psychological mark.

The pair's retracement slide from an intraday high level of 0.7032 lacked any obvious catalyst and could be attributed to a modest US Dollar rebound, further supported by slightly better-than-expected ADP report on the US private sector employment.

Meanwhile, the announcement that the US Treasury increased auction sizes of all nominal coupon debt to fund soaring deficit triggered a sharp retracement in the US bond yields but did little to prompt some fresh buying around higher-yielding currencies - like the Kiwi. 

Despite a good two-way move, the pair has still managed to hold with modest daily gains and was being supported by the prevalent strong bullish sentiment around commodity space, which tends to underpin demand for the commodity-linked NZ Dollar.

Investors now start repositioning for today's key event risk, the highly anticipated FOMC decision. The Fed is widely expected to leave interest rates unchanged but the accompanying statement would be closely scrutinized for clues over the future policy tightening and would eventually help investors determine the pair's next leg of directional move.

Technical levels to watch

A follow-through retracement below the 0.7000-0.6990 region is likely to accelerate the slide towards 0.6960 intermediate support en-route the 0.6910-0.6900 area. On the upside, 0.7030-35 area might continue to act as an immediate resistance, above which a fresh bout of short-covering might assist the pair to dart back towards reclaiming the 0.7100 handle.