NZD/USD goes into consolidation, clings to modest gains above 0.7000
- NZD/USD pair gained traction during the Asian session.
- US Dollar Index continues to move sideways above 93.00.
- Investors wait for FOMC to announce policy decisions.
The NZD/USD pair closed the fourth straight day in the negative territory on Tuesday but managed to stage a rebound during the Asian trading hours on Wednesday. With the trading action turning subdued in the European session, the pair seems to have gone into a consolidation phase and was last seen rising 0.22% on the day at 0.7020.
Focus shifts to FOMC
As expected, the People's Bank of China (PBoC) announced on Wednesday that it left the 1-year and 5-year LPRs unchanged at 3.85% and 4.65%, respectively. However, the bank injected around 110 billion Chinese yuan of short-term cash and eased fears over the Evergrande financial crisis turning into a global turmoil. In turn, China-proxy NZD managed to gather strength against its American counterpart.
On the other hand, the US Dollar Index continues to move sideways near 93.20 as investors remain on the sidelines while waiting for the US Federal Reserve to release its rate decision alongside the updated Summary of Economic Projections.
Market participants will look for fresh hints regarding the timing of asset tapering. Previewing the FOMC meeting, "the Fed is set to leave its policy unchanged but hint about the next steps," said FXStreet Analyst Yohay Elam. "There is a high chance that Chair Powell conveys a dovish message, downing the dollar."
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Technical levels to watch for