NZD/USD consolidates near daily lows as investors get ready for FOMC

After closing the previous day below the 0.73 handle, the NZD/USD pair continued its downfall on Wednesday and renewed its lowest level since June 28 at 0.7258. Following the initial drop, the pair went into a consolidation phase before the FOMC releases its June meeting minutes later in the session. At the moment, the pair is trading at 0.7265, losing 0.3% on the day.

The demand for the greenback remained high as the trading volume returned to normal levels after the Independence Day holiday in the U.S. Building on its gains from the start of the week, the US Dollar Index pushed higher to 96.25 and is now at 96.16, up 0.18% on the day. Furthermore, the AUD/USD pair has been facing a heavy selling pressure since the RBA meeting in the early Asian session on Tuesday and also weighing on the positively correlated NZD/USD pair.

In the meantime, with the barrel of West Texas Intermediate losing more than 1% on the day, the recovery seen in crude oil seems to have come to a halt, which hurts the demand for commodity-linked currencies like the kiwi.

Investors will look for clues about the timing of the implementation of the reinvestment policy in today's FOMC minutes. Moreover, it will be important to see is the MPC still sees the disinflation still transitory. A hawkish tone in today's release could help the greenback gather more strength.

• FOMC minutes in the limelight – Nomura

Technical outlook

To be able to correct its recent losses, the pair could need to make a daily close above 0.7300 (psychological level/10-DMA). 0.7375 (Feb. 7 high) and 0.7400 (psychological level/Nov. 8 high) could come as next technical resistance above that level. On the downside, supports locate at 0.7250 (Jun. 23 low), 0.7200 (psychological level) and 0.7120 (50-DMA).