NZD/USD flat-lines below mid-0.6400s ahead of US data, focus remains on FOMC

• NZD/USD reverses an intraday dip that followed the release of the New Zealand jobs data.
• The prevalent USD selling bias turns out to be a key factor that lends support to the major.
• The cautious market mood caps the risk-sensitive Kiwi ahead of the critical FOMC decision.

The NZD/USD pair attracts some buyers near the 0.6420-0.6415 area on Wednesday, though the uptick lacks bullish conviction. Spot prices hold below mid-0.6400s and remain well within the striking distance of over a one-week low touched the previous day.

As investors digest slightly weaker New Zealand employment details, the prevalent US Dollar selling bias turns out to be a key factor acting as a tailwind for the NZD/USD pair. In fact, Statistics New Zealand reported earlier this Wednesday that the unemployment rate edged up to 3.4% in the fourth quarter against the 3.3% expected and the previous. This, in turn, forced investors to scale back their expectations for a more aggressive policy tightening by the Reserve Bank of New Zealand (RBNZ) and weighed on the domestic currency.

That said, the underlying bearish sentiment surrounding the USD helps offset the negative factor and lends some support to the NZD/USD pair. Expectations that the Federal Reserve will slow the pace or even signal an end to the rate-hiking cycle drag the US Treasury bond yields lower and continue to undermine the greenback. Traders, however, seem reluctant to place fresh directional bets and prefer to move to the sidelines ahead of the highly-anticipated FOMC monetary policy decision, scheduled to be announced later during the US session.

Heading into the key central bank event risk, traders on Wednesday will take cues from the US macro - the ADP report on private-sector employment, ISM Manufacturing PMI and JOLTS Job Openings. This, along with the US bond yields, might influence the USD and provide some impetus to the NZD/USD pair. In the meantime, the prevalent cautious mood - as depicted by a generally negative tone around the equity markets - might cap the risk-sensitive Kiwi.

Technical levels to watch