NZD/USD sticks to modest intraday gains, holds above 0.6100 amid softer USD

• NZD/USD regains some positive traction on Tuesday amid subdued USD price action.
• China’s COVID-19 woes, hawkish Fed signals should act as a tailwind for the greenback.
• Traders also seem reluctant ahead of the RBNZ and the FOMC minutes on Wednesday.

The NZD/USD pair attracts some dip-buying on Tuesday and reverses a part of the previous day's losses to sub-0.6100 levels. The pair sticks to its modest gains through the early European session and is currently trading near the top end of the daily range, around the 0.6120 region.

The US Dollar struggles to gain any meaningful traction and is seen consolidating the overnight strong move up to a one-week high, which, in turn, offers some support to the NZD/USD pair. That said, the prevalent cautious mood around the equity markets acts as a tailwind for the safe-haven greenback and keeps a lid on any further gains for the risk-sensitive Kiwi, at least for now.

Investors remain concerned about the potential economic headwinds stemming from a new COVID-19 outbreak in China and the imposition of fresh lockdowns in some cities. Furthermore, China's National Health Commission (NHC) stresses adhering to the zero-COVID policy. This, along with the risk of a further escalation in the Russia-Ukraine conflict, continues to weigh on the risk sentiment.

Meanwhile, doubts about the peak inflation narrative and hawkish signals by several Fed officials suggest that the US central bank might still be far from pausing its policy-tightening cycle. This, in turn, favours the USD bulls and should also contribute to capping the NZD/USD pair. Traders might also prefer to move to the sidelines and wait for a fresh catalyst from this week's key event risks.

The Reserve Bank of New Zealand (RBNZ) is scheduled to announce its policy decision on Wednesday, which will be followed by the release of the FOMC meeting minutes. This, in turn, will determine the next leg of a directional move for the NZD/USD pair. In the meantime, traders on Tuesday will take cues from a scheduled speech by Cleveland Fed President Loretta Mester for some impetus.

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