NZD/USD couldn’t sustain near the weekly high near 0.6651 as Federal Open Market Committee minutes showed no signs of change in guidance. The pair might face more selling pressure ahead as the Relative Strength Index has signalled a bearish play in August.
NZD/USD couldn’t sustain the rebound from the monthly low of 0.6519 as the Fed minutes suggested that the central bank will likely follow an outcome-based approach rather than a calendar-based one on its forward guidance. They also felt yield targets and caps wouldn’t be much beneficial in the current context.
According to the minutes, several members noted that providing greater clarity regarding the probable path of the target range for the fed rates would be appropriate at some point.
Markets are still guessing whether the Fed will cut back on its unusual tools before 2021. Still, the current stated policy of the central bank is to continue supporting the economy at least at the current pace of asset purchases. But an increasing number of fed officials want the US lawmakers to provide fiscal policy support to encourage fast improvement in the economic parameters, especially on the employment front.
The upcoming interest rate decision on September 16 might not have any surprises as the Fed has given strong indications earlier about its intention to support the economy continuously. But, FOMC minutes also say “participants generally judged that the Committee’s policy actions over the past several months had provided substantial accommodation,” indicating a gradual adjustment in the forward guidance ahead of 2021.
The NZD/USD might get support from the surge in dollar shorts, continuing the major trend; the retail traders are net short the pair since mid-June.