NZD/USD retraces Tuesday's rebound, steadies below 0.65
- US Dollar Index rebounds toward 98.50 following Tuesday's drop.
- GDT auction yields a 2% increase in GDT Price Index.
- Focus remains on FOMC meeting and monetary policy announcements.
The NZD/USD pair took advantage of the broad-based USD weakness and New Zealand's upbeat Global Dairy Trade (GDT) auction, which yielded a 2% increase in the GDT Price Index following the 0.4% decline in the previous auction, and snapped its five-day losing streak to end the day with a modest 20-pip gain.
With the trading action turning subdued ahead of the Federal Reserve's critical monetary policy announcements, the pair is having a difficult time preserving its bullish momentum. As of writing, it was down 0.35% on the day at 0.6335.
Meanwhile, concerns over a military conflict in the Middle East following the attacks on Saudi oil facilities don't allow the market sentiment to recover and weigh on risk-sensitive currencies such as the NZD.
Attention shifts to FOMC
Later in the day, Building Permits and Housing Starts data from the US will be released but are likely to be ignored by the market participants as they are likely to refrain from making any large bets while waiting for the outcome of this week's Federal Open Market Committee (FOMC) meeting.
Previewing this crucial market event, “We expect the Fed to cut its key policy rates by 25 bps at this week’s FOMC meeting – which would be the second consecutive rate cut in the current easing cycle – taking the Fed Funds corridor to 1.75-2.00% with an Interest On Excess Reserves (IOER) rate of 1.85%. Two hawks will likely dissent...again,” said Nordea Markets analysts.
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Technical levels to consider