NZD/USD rebounds from multi-week lows, back above 0.6600 handle

• RBNZ rate cut speculations/dismal NZ business confidence data weighed on the Kiwi.
• Deteriorating risk sentiment amid fresh US-China trade war fears added to the selling bias.
• A subdued USD demand helped limit the downside ahead of the key FOMC policy update.

The NZD/USD pair managed to recover a major part of its early slide to fresh three-week lows and has now moved back above the 0.6600 handle, albeit lacked any strong follow-through.

The pair added to its recent losses and retreated farther from three-month tops set on July 19 amid speculations that the RBNZ is looking at unconventional monetary policy. The downfall accelerated further on Wednesday following the disappointing release of the NZ Business confidence index, which deteriorated further to -44.3 in July from 38.1 in the previous month.

This coupled with a slight deterioration in the global risk sentiment, led by renewed trade war fears and unimpressive Chinese manufacturing PMI print for July, further collaborated towards driving flows away from perceived riskier currencies – like the Kiwi and dragged the pair to an intraday low level of 0.6587- back closer to monthly swing low set on July 10.  

Meanwhile, a subdued US Dollar price action did little to influence the momentum but seemed to be the only factor lending some support, rather helped the pair to rebound around 15-20 pips. The uptick, however, lacked any strong conviction as investors seemed reluctant to place any aggressive bets ahead of the highly anticipated FOMC policy decision.

Heading into the key event risk, the US economic docket – featuring the release of ADP report on private-sector employment, will be looked upon for some short-term trading opportunities later during the early North-American session on Wednesday.

Technical levels to watch