NZD/USD trades with modest losses, holds above 0.6200 as focus remains on FOMC

• NZD/USD meets with some supply on Tuesday and snaps a two-day winning streak.
• The USD holds steady just below a two-week high and acts as a headwind for the pair.
• The downside seems cushioned as traders keenly await the key FOMC policy decision.

The NZD/USD pair struggles to capitalize on its gains registered over the past two days, from the 0.6115 area or a two-week low, and edges lower during the Asian session on Wednesday. Spot prices, however, manage to hold above the 0.6200 round figure as traders keenly await cues about the Federal Reserve's (Fed) future rate-hike path.

It is worth recalling that the markets have been pricing out the possibility of any further rate hikes after the widely expected 25 bps lift-off at the end of a two-day FOMC policy meeting later this Wednesday. Investors, however, remain sceptic if the US central bank will commit to a more dovish stance. Hence, the focus will remain glued to the accompanying monetary policy statement and Fed Chair Jerome Powell's comments during the post-meeting press conference. This will play a key role in influencing the near-term US Dollar (USD) price dynamics and determining the next leg of a directional move for the NZD/USD pair.

In the meantime, signs of an extremely resilient US economy assist the USD Index (DXY), which tracks the Greenback against a basket of currencies, to hold steady just below the two-week high touched on Tuesday. This, along with the worsening US-China trade ties and geopolitical risks, exerts some downward pressure on the NZD/USD pair. Traders, however, seem reluctant to place aggressive bets and might prefer to wait on the sidelines heading into the key central bank event risk. This warrants caution before positioning for the resumption of the recent pullback from a multi-month peak - levels just above the 0.6400 mark.

From a technical perspective, the NZD/USD pair earlier this week managed to defend and rebound from a support marked by the 61.8% Fibonacci retracement level of the June-July rally. The subsequent move and acceptance above a confluence, comprising the 100-day Simple Moving Average (SMA) and the 50% Fibo. level, supports prospects for the emergence of some dip-buying. That said, it will still be prudent to wait for a sustained move beyond the 38.2% Fibo. resistance near mid-0.6200s before placing fresh bullish bets in the absence of a fresh fundamental catalyst and market-moving macro data from New Zealand.

Technical levels to watch