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  • NZD/USD witnessed some profit-taking on Tuesday and retreated further from multi-year tops.
  • A subdued USD price action might extend some support and help limit any meaningful downfall.
  • Investors now eye second-tier US economic data for some impetus ahead of the FOMC meeting.

The NZD/USD pair edged lower during the early European session and dropped to three-day lows, around the 0.7060 region in the last hour.

Following a brief consolidation through the first half of the trading action on Tuesday, the pair witnessed some selling and retreated further from the highest level since April 2018 set in the previous session. The pullback could be solely attributed to some profit-taking and is likely to remain limited amid a subdued US dollar price action.

The USD Index languished near two-and-half-year lows amid the recent optimism over the rollout of vaccines for the highly contagious coronavirus disease. Apart from this, expectations for additional US fiscal stimulus measures exerted some additional pressure on the greenback and might help limit any further slide for the NZD/USD pair, at least for now.

Investors might also refrain from placing aggressive bets, rather prefer to wait on the sidelines ahead of a two-day FOMC monetary policy meeting, starting this Tuesday. In the runup to the key event risk, the markets have been pricing in the possibility that the Fed will ease its monetary policy further by expanding the bond-buying program.

In the meantime, Tuesday’s US economic docket – featuring the second-tier releases of the Empire State Manufacturing Index and Industrial Production data – will be looked upon for some impetus. This, along with the US stimulus headlines, might influence the USD price dynamics and produce some trading opportunities around the NZD/USD pair.

Technical levels to watch