NZD/USD stays in red near 0.6860 after DXY erases daily losses post-FOMC

• FOMC meeting minutes confirm  the Fed’s neutral stance.
• US Dollar Index recovers to 96.50 in late NA session.

The NZD/USD pair spent the first half of the day under moderate bearish pressure and dropped to a daily low of 0.6850 before rebounding in the NA session. After taking advantage of the USD weakness and rising toward the 0.69 mark, however, the pair lost its momentum and was last seen trading at 0.6860, losing 0.35% on a daily basis.

The US Dollar Index  slumped to a two-week low of 96.29 on Wednesday but was able to gain traction on the back of some relatively hawkish remarks seen in the FOMC’s meeting minutes. “Policymakers favored patient approach to observe effects of past rate hikes,” the FOMC said. “Several participants said rate hikes might prove necessary only if inflation outcomes higher than baseline outlook.”  

Regarding the balance sheet reduction scheme, the FOMC highlighted that almost all participants agreed that it would be desirable to announce the plan to stop reducing the balance sheet later this year. Supported by the FOMC minutes, the DXY turned flat on the day a little above the 96.50 mark.

There won’t be any macroeconomic data releases from New Zealand on Thursday and markets will be watching the labour market data from Australia for any significant reactions in the AUD/USD pair. Later in the day, weekly jobless claims, durable goods orders, Markit Manufacturing PMI, and existing home sales, from the U.S. will be featured in the economic calendar.

Key technical levels