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  • NZD/USD extended its daily rally in the early American session.
  • US Dollar Index looks to snap two-day winning streak.
  • Risk-positive market environment weighs on safe-haven USD on Tuesday.

The NZD/USD pair broke above 0.7200 in the early European morning and preserved its bullish momentum in the second half of the day. After touching its highest level in two weeks at 0.7248, the pair seems to have gone into a consolidation phase and was last seen gaining 0.6% on a daily basis at 0.7240.

Risk flows hurt the DXY

The unabated selling pressure surrounding the USD fueled NZD/USD’s daily rally on Tuesday. The US Dollar Index slumped to a daily low of 90.11 after major equity indexes in the US opened in the positive territory and made it difficult for the safe-haven greenback to find demand. At the moment, the DXY is down 0.25% at 90.17.

The data published by the Conference Board showed on Tuesday that the consumer confidence in the US improved modestly in January but was largely ignored by market participants.

There won’t be any macroeconomic data releases from New Zealand on Wednesday and investors will shift their focus to the FOMC’s policy announcements. 

The Fed is largely expected to keep its policy unchanged. However, market participants will look for fresh clues regarding possible changes to asset purchases especially if the coronavirus relief bill gets delayed.

Fed Preview: Fearing market froth or boosting Biden’s stimulus? Three scenarios.

Technical levels to watch for