NZD/USD clings to modest recovery gains, comfortable above 0.70 handle

   •  A modest USD retracement prompts some short-covering ahead of the FOMC.
   •  Bullish commodities underpin demand and supportive of the recovery move. 

The NZD/USD pair snapped its losing streak on Wednesday and staged a modest recovery move from sub-0.7000 level, the lowest since December 21.

Following the recent slump of around 400-pips from the 0.7400 neighborhood touched in mid-April, a modest US Dollar retracement was seen as one of the key factors behind the pair's modest uptick on Wednesday. The uptick was further supported by bullish commodity prices, which tends to underpin demand for the commodity-linked New-Zealand Dollar. 

The pair, however, might struggle to build on the recovery move as investors are likely to refrain from placing aggressive bets ahead of the highly anticipated FOMC monetary policy decision, scheduled to be announced later during the NY trading session. 

Hence, it would be prudent to wait for a strong follow-through buying interest to confirm that the rebound is not solely led by some short-covering and that the pair might have bottomed out in the near-term. 

Ahead of the key event risk, the ADP report on the US private sector employment might influence the USD price dynamics and might assist traders to grab some short-term trading opportunities.

Technical levels to watch

Any subsequent recovery move is likely to confront resistance near the 0.7035-40 region, above which the pair could aim back towards reclaiming the 0.7100 handle. On the flip side, the pair might continue to find some support near the 0.70-0.6990 region, which if broken is likely to accelerate the fall further towards mid-0.6900s.