The NZD/USD currency pair has stalled in its recovery from a nearly four-week low, trading below 0.6200 in the early European session on Wednesday.

As the Federal Reserve draws towards the end of its rate-hiking cycle, the US dollar (USD) has been languishing near the weekly low, which has helped the NZD/USD pair attract some buying in the mid-0.6100s. Investors still anticipate a rate hike of 25 basis points from the FOMC in May. The yield on US Treasuries remains stabilized for now, which is good news for the currency.

However, restraints on the risk-taking New Zealand dollar are put in place due to worries about a worsening global economic slump. On Tuesday, the International Monetary Fund cut its global growth prediction for 2023 because of rising interest rates. When Neel Kashkari was president of the Minneapolis Fed, he expressed concern that tightening monetary policy would lead to a recession.

Technically speaking, if the price accepts below 0.6200, it could encourage more significant losses from pessimistic traders. But lower-tier purchases warrant caution. This mixed technical combination indicates waiting for follow-through purchasing to establish that the current pullback from the 0.6380 area, the highest level since February 14th, has run its course and position for future gains.

Conclusion

Traders are wary about making large directional bets before releasing US consumer inflation data later in the early North American session. Then, clues about future Fed rate increases will be culled from the FOMC meeting minutes. The NZD/USD pair’s next direction will depend on the USD price dynamics.