NZD/USD eases from tops, still well bid around 0.7030-35 ahead of FOMC minutes

• NZD/USD showed resilience below the 0.7000 mark and regained positive traction on Wednesday.
• RBNZ rate hike expectations continued lending some support to the kiwi and provided a modest lift.
• A subdued USD demand remained supportive of the move up ahead of the FOMC meeting minutes.

The NZD/USD pair maintained its bid tone through the early North American session, albeit has retreated a few pips from daily tops. The pair was last seen trading around the 0.7030-35 region, up over 0.25% for the day.

Following the previous day's dramatic turnaround from a near three-week high level of 0.7105, the NZD/USD pair managed to regain some positive traction on Wednesday. The markets have started pricing in the prospects for an interest rate hike by the Reserve Bank of New Zealand (RBNZ) in November. This was seen as a key factor that continued acting as a tailwind for the kiwi.

On the other hand, the US dollar struggled to capitalize on the overnight goodish move up amid expectations that the Fed will stick to its ultra-lose policy stance for a longer period. Apart from this, the ongoing sharp downfall in the US Treasury bond yields, along with a positive opening in the US equity markets further undermined the greenback's relative safe-haven demand.

The combination of factors provided a modest lift to the NZD/USD pair. That said, concerns about the spread of the highly contagious Delta variant of the coronavirus capped any further gains, at least for now. Investors also seemed reluctant to place any aggressive bets, rather preferred to wait on the sidelines ahead of the release of the highly-anticipated FOMC June meeting minutes.

It is worth recalling that the Fed surprised investors at the end of the June meeting and brought forward its timetable for the first post-pandemic interest rate hike. Hence, the minutes will be looked upon for fresh clues about the central bank's policy outlook, which will influence the USD price dynamics and provide a fresh directional impetus to the NZD/USD pair.

Technical levels to watch