NZD/USD eases from multi-week top post-US ADP report, holds above 0.6200 ahead of FOMC

• NZD/USD climbs to over a two-week high in reaction to the upbeat domestic jobs data.
• A combination of factors weighs heavily on the USD and remains supportive of the move.
• The upbeat US ADP report does little to provide any impetus ahead of the FOMC decision.

The NZD/USD pair gains strong follow-through positive traction for the second successive day and climbs to a two-and-half-week top, around the mid-0.6200s on Wednesday. The pair maintains its bid tone heading into the North American session, though struggles to capitalize on the move and remains below a technically significant 200-day Simple Moving Average (SMA).

The New Zealand Dollar (NZD) continues to draw support from the upbeat domestic jobs data, which backs the case for further interest rate hikes by the Reserve Bank of New Zealand (NZD). Apart from this, the ongoing US Dollar (USD) retracement slide from a three-week high touched on Tuesday provides an additional boost to the NZD/USD pair and remains supportive of the intraday positive move. Concerns over the US debt ceiling, along with renewed fears of a full-blown banking crisis, drag the US Treasury bond yields lower and continue to weigh on the Greenback.

Apart from this, a slight recovery in the global risk sentiment - as depicted by a positive tone around the equity markets - further undermines the safe-haven buck and benefits the risk-sensitive Kiwi. The USD bulls, meanwhile, seem rather unimpressed by the upbeat US ADP report, which showed that private-sector employers added 296K jobs in April as compared to the 142K in the previous month and 148K anticipated. The upside, however, remains capped, at least for the time being, as traders now seem reluctant ahead of the highly-anticipated FOMC policy decision.

The Federal Reserve (Fed) is widely expected to hike rates by 25 bps and could soften its hawkish stance amid slowing economic growth. Investors, however, remain divided over the possibility that the Fed will announce a pause in its rate-hiking cycle as inflation is still trending above the target. Hence, the accompanying policy statement and Fed Chair Jerome Powell's comments at the post-meeting presser will be scrutinized for clues about the future rate-hike path. This, in turn, will influence the USD price dynamics and provide a fresh impetus to the NZD/USD pair.

Technical levels to watch