NZD/USD sticks to modest gains around 0.6225-30 area but lacks bullish conviction

• NZD/USD attracted some buying in the vicinity of the YTD low amid subdued USD demand.
• The Fed’s hawkish outlook should help limit losses for the USD amid growing recession fears.
• Investors look forward to the US Core PCE Price Index for some meaningful trading impetus.

The NZD/USD pair showed some resilience below the 0.6200 mark on Thursday and staged modest recovery from the vicinity of the YTD low. The pair traded with a mild positive bias through the early European session and was last seen hovering near the top end of its daily range, around the 0.6225-0.6230 area.

The US dollar struggled to capitalize on its strong gains recorded over the past two trading sessions and was seen consolidating in a range near a two-week high touched the previous session. This was seen as a key factor that offered support to the NZD/USD pair, though any meaningful upside seems elusive.

Fed Chair Jerome Powell reaffirmed bets for a more aggressive policy tightening to combat stubbornly high inflation and added to worries about a possible recession. In fact, market participants remain concerned that rapidly rising interest rates would pose challenges to global economic growth.

This continued weighing on investors' sentiment, which was evident from the prevalent risk-off mood and a sea of red across the equity markets. The anti-risk flow, along with the Fed's hawkish outlook, should act as a tailwind for the safe-haven greenback and cap any further gains for the risk-sensitive kiwi.

Hence, it will be prudent to wait for strong follow-through buying before confirming that the NZD/USD pair has formed a near-term bottom and placing fresh bullish bets. Market participants now look forward to the US macro data for short-term trading impetus later during the early North American session.

Thursday's US economic docket features the release of the Core PCE Price Index - the Fed's preferred inflation gauge - and the usual Weekly Initial Jobless Claims. This, along with the broader risk sentiment, will drive the USD demand and produce some trading opportunities around the NZD/USD pair.

Technical levels to watch