NZD/USD sticks to gains above 0.6200 mark, moves little after RBNZ's inaction

• NZD/USD catches fresh bids and touches a three-week high amid sustained USD selling.
• Bets that the Fed is nearing the end of its rate-hiking cycle continue to weigh on the buck.
• The RBNZ decides to leave the OCR unchanged and does little to provide any impetus.

The NZD/USD pair regains positive traction following the previous day's brief pause and climbs to over a three-week high during the Asian session on Wednesday. Spot prices, however, retreat around 10-15 pips after the Reserve Bank of New Zealand (RBNZ) announced its policy decision and currently trade above the 0.6200 mark, still up 0.20% for the day.

As was widely expected, the RBNZ left the official cash rate (OCR) unchanged at 5.50% following its July monetary policy meeting and noted that interest rates are constraining spending and inflation pressure as required. In the accompanying policy statement, the RBNZ noted that the OCR will need to remain at a restrictive level for the foreseeable future, to ensure that consumer price inflation returns to the 1 to 3% annual target range, while supporting maximum sustainable employment. In the absence of any hawkish surprise, the announcement does little to impress bullish traders or assist the NZD/USD pair to build on its modest intraday gains.

The downside, however, remains cushioned in the wake of the prevailing US Dollar (USD) selling bias. Fresh speculations that the Federal Reserve (Fed) is nearing the end of its rate-hiking cycle lead to a further pullback in the US Treasury bond yields and continue to weigh on the Greenback. Apart from this, a generally positive risk tone turns out to be another factor undermining the safe-haven buck and benefitting the risk-sensitive Kiwi. This, in turn, suggests that the path of least resistance for the NZD/USD pair is to the downside. Traders, however, might refrain from placing aggressive bets and prefer to wait for the latest US consumer inflation figures.

The crucial US CPI report is due for release later during the early North American session and might play a key role in influencing the Fed's future rate-hike path. This, in turn, will drive the USD demand in the near term and help determine the next leg of a directional move for the NZD/USD pair. From a technical perspective, acceptance above the 100-day Simple Moving Average (SMA) adds credence to the positive outlook and supports prospects for a further near-term appreciating move for the major.

Technical levels to watch