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  • A combination of factors assisted NZD/USD to regain positive traction on Wednesday.
  • The greenback added to its recent losses amid the ongoing slide in the US bond yields.
  • The upbeat market mood provided an additional boost to the perceived riskier kiwi.
  • Investors now eye US CPI report for some impetus ahead of the FOMC policy decision.

The NZD/USD pair edged higher through the early European session and was last seen trading near mid-0.6500s, well within the striking distance of multi-month tops set on Tuesday.

Following the previous day’s modest pullback from the highest level since late January, the pair managed to regain some traction on Wednesday. The uptick was supported by a combination of factors, including a positive mood around equity markets and sustained selling around the US dollar.

Expectations that the worst of the coronavirus pandemic was over and growing hopes for a V-shaped recovery for the global economy remained supportive of the upbeat market mood. This, in turn, continued underpinning sentiment surrounding perceived riskier currencies, like the kiwi.

On the other hand, greenback added to its recent losses and was further pressured by the possibility of a dovish outlook from the Fed. This was evident from some follow-through slide in the US Treasury bond yields. The prevalent USD selling bias provided an additional boost to the NZD/USD pair.

Hence, Wednesday’s key focus will be on the latest FOMC policy decision. The Fed is widely expected to leave interest rates unchanged. Hence, investors will closely scrutinize the accompanying policy statement and the Fed Chair Jerome Powell’s comments for clues about the future policy path.

Heading into the key event risk, the release of the latest US consumer inflation figures might influence the USD price dynamics and produce some short-term trading opportunities during the early North American session.

Technical levels to watch

 

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