NZD/USD, steady near 0.5700, downside attempts capped at 0.5645

• New Zealand dollar's reversal from 0.5720, contained at 0.5645.
• The kiwi remains moderately positive amid a risk-on mood.
• NZD/USD is expected to consolidate between 1.5570 and 1.5755 – UOB.

The New Zealand dollar remains bid for the second consecutive day on Tuesday. The pair’s reversal from the 0.5700 area has found support at the mid-0.5600, before picking up again to the 0.5685 area.

The kiwi extends recovery as risk appetite prevails

Monday’s positive market sentiment seems to have extended into Tuesday. European stock markets closed with advances between 0.2% and 0.9%, while the US indexes are posting gains beyond 1%, which is underpinning New Zealand dollar's moderate positive tone.

In the macroeconomic docket, the higher-than-expected New Zealand Consumer Price Index has fed hopes of further monetary tightening by the Reserve Bank of New Zealand, which has provided some support to the NZD.

Kiwi bulls, however, seem to be capped below 0.5700 as hopes of another aggressive Fed rate hike in September, are keeping USD weakness on a leash. The market is pricing in a nearly 100% chance that the Fed will hike rates by 75 basis points in November which provides significant support to the USD.

NZD/USD expected to consolidate between 0.5570 and 0.5755 – UOB

Regarding the near-term perspective, FX analysts at UOB expect the pair to consolidate at current levels: “The breach of our ‘strong resistance’ level at 0.5560 indicates that the weakness in NZD has ended. NZD appears to have moved into a consolidation phase and is likely to trade between 0.5570 and 0.5755 for the time being.”

Technical levels to watch