NZD/USD Price Analysis: Sticks to modest recovery gains above 0.6100, lacks follow-through

• NZD/USD staged a modest recovery from sub-0.6100 levels, or over a two-year low.
• Sustained USD buying and the risk-off mood capped gains for the risk-sensitive kiwi.
• Investors also seemed reluctant ahead of the RBNZ and the US CPI on Wednesday.

The NZD/USD pair showed resilience below the 0.6100 round-figure mark and gained some positive traction on Tuesday. The uptick assisted spot prices to recover a part of the previous day's sharp decline to the lowest level since May 2020, though lacked any follow-through buying.

The relentless US dollar buying remained unabated amid expectations that the Fed would stick to its aggressive policy tightening path. Apart from this, the prevalent risk-off environment - fueled by growing recession fears - pushed the safe-haven USD to a fresh 20-year high and acted as a headwind for the risk-sensitive kiwi.

Looking at the broader picture, the NZD/USD pair has been declining along a descending channel over the past four weeks or so. This points to a well-established short-term bearish trend and supports prospects for a further depreciating move for the NZD/USD pair. Traders, however, seemed reluctant ahead of this week's key event/data risk.

The Reserve Bank of New Zealand (RBNZ) is scheduled to announce its monetary policy decision during the Asian session on Wednesday. Apart from this, the market focus will remain on the latest US consumer inflation figures, which will influence the near-term USD price dynamics and provide a fresh directional impetus to the NZD/USD pair.

From current levels, any subsequent slide below the 0.6100 mark is likely to find some support near the lower end of the aforementioned channel, currently around the 0.6065-0.6060 region. A convincing break below would be seen as a fresh trigger for bearish traders and make the NZD/USD pair vulnerable to testing the 0.6000 psychological mark.

On the flip side, momentum beyond the 0.6125-0.6130 region, or the daily high, might confront some resistance near the 0.6180 area ahead of the 0.6200 mark. The latter coincides with the descending channel resistance and is closely followed by the 100-period SMA on the 4-hour chart, currently around the 0.6230-0.6235 zone.

A sustained break through the said barriers would suggest that the NZD/USD pair has formed a near-term bottom and trigger a short-covering move. Bulls might then aim back to reclaim the 0.6300 round-figure mark and lift spot prices further towards the next relevant resistance near the 0.6325 supply zone.

NZD/USD 4-hour chart

Key levels to watch