NZD/USD clings to daily gains above 0.7100 as focus shifts to Powell speech

• NZD/USD jumped to its highest level in three weeks above 0.7100.
• RBNZ left its policy rate unchanged at 0.25% as expected.
• US Dollar Index fluctuates below 92.00 following Tuesday’s decline.

The NZD/USD pair closed in the positive territory on Tuesday and continued to push higher on Wednesday. After touching its best level in three weeks at 0.7121, the pair seems to have gone into a consolidation phase and was last seen gaining 0.92% on the day at 0.7116.

Earlier in the day, the Reserve Bank of New Zealand (RBNZ) announced that it left its policy rate unchanged at 0.25% as expected. In its policy statement, the RBNZ reiterated that the outlook remains highly uncertain and noted that the current policy setting will remain in place until they are confident that inflation and employment targets will be achieved.

The RBNZ’s remarks on the monetary policy outlook failed to trigger a significant market reaction and the broad-based selling pressure surrounding the greenback allowed NZD/USD to preserve its bullish momentum.

DXY remains on the back foot

Meanwhile, the US Dollar Index (DXY) is having a difficult time staging a meaningful rebound after losing 0.3% on Tuesday pressured by the sharp decline seen in the benchmark 10-year US Treasury bond yield. Later in the session, FOMC Chairman Jerome Powell will be delivering a speech.

Additionally, the Federal Reserve’s Beige Book will be assessed by market participants for fresh clues regarding price pressures. At the moment, the 10-year US T-bond yield is up nearly 1% on the day and the USD could start outperforming its rivals if yields continue to edge higher.

Technical levels to watch for