NZD/USD sticks to intraday gains, remains below multi-week high ahead of FOMC
|- NZD/USD attracts fresh buyers on Wednesday after mostly upbeat domestic employment details.
- Hopes for a less hawkish Fed keep the USD bulls on the defensive and also contribute to the uptick.
- Investors now look to the highly-anticipated FOMC decision before placing fresh directional bets.
The NZD/USD pair gains some positive traction for the third successive day on Wednesday and maintains its bid tone through the early European session. The pair is currently placed around the 0.5870-0.5875 region, though remains below its highest level since September 21 touched the previous day.
The New Zealand dollar draws some support from the mostly upbeat domestic employment report, which showed that the jobless rate held steady near the record low level of 3.3% during the third quarter. Adding to this, the number of employed people rose more than expected, by 1.3% during the reported period against expectations of a 0.5% increase. This, along with the emergence of fresh selling around the US dollar, is seen acting as a tailwind for the NZD/USD pair.
Speculations that the Federal Reserve will adopt a less hawkish stance, amid signs of a slowdown in the US economy, turn out to be a key factor that continues to weigh on the greenback. The expectations were reaffirmed by the US ISM manufacturing business survey result, which showed that the Prices Paid Index contracted for the first time since May 2020. This points to easing inflationary pressures and might force the Fed to slow the pace of its rate-hiking cycle.
Hence, the focus will remain glued to the outcome of a two-day FOMC monetary policy meeting, scheduled to be announced later during the US session. The US central bank is widely expected to deliver another supersized 75 bps rate hike for the fourth successive time in as many meetings. Investors, meanwhile, will closely scrutinise the accompanying policy statement and Fed Chair Jerome Powell's comments at the post-meeting press conference for clues about future rate hikes.
The outlook will play a key role in influencing the near-term USD price dynamics and help determine the next leg of a directional move for the NZD/USD pair. Heading into the key central bank event risk, traders might refrain from placing aggressive bets, suggesting that the ADP report on the US private-sector employment might do little to provide any impetus. This, in turn, warrants some caution before positioning for any further appreciating move for the major.
Technical levels to watch
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