- NZD/USD staged a solid rebound from multi-month lows after RBNZ monetary policy decision.
- A subdued USD demand remained supportive; COVID-19 jitters kept a lid on any further gains.
- Investors look forward to the release of FOMC meeting minutes for a fresh directional impetus.
The NZD/USD pair struggled to capitalize on its solid intraday bounce from multi-month lows and quickly retreated around 25 pips from daily swing highs. The pair was last seen trading with modest gains, near the 0.6925 region.
The pair witnessed some selling during the Asian session and dropped to the lowest level since November 2020 after the Reserve Bank of New Zealand (RBNZ) announced its latest policy decision. The RBNZ decided to keep the cash rate on hold at 0.25% in light of new COVID cases in New Zealand and the imposition of fresh restrictions.
The intraday downfall, however, turned out to be short-lived and was quickly bought into after the RBNZ Governor Adrian Orr left the door open for a rate hike in the near future. In fact, investors are now pricing in 60% chances of a hike in October, which, in turn, assisted the NZD/USD pair to attract some buying near the 0.6870-65 region.
The NZD/USD pair rallied over 80 pips from daily swing lows, though struggled to capitalize on the move beyond mid-0.6900s. Investors remain worried about the potential economic fallout from the fast-spreading Delta variant of the coronavirus. This was seen as the only factor that acted as a headwind for the perceived riskier kiwi.
On the other hand, the US dollar was seen consolidating the previous day's strong move up amid signs of stability in the equity markets. This should lend some support to the NZD/USD pair as the market focus now shifts to the release of the FOMC monetary policy meeting minuted, due later during the US session on Wednesday.
Investors will look for cues about the likely timing when the Fed will begin tapering its asset purchases. This will play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to the NZD/USD pair.
Technical levels to watch
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