NZD/USD retreats further from YTD peak, slides below 0.5800 ahead of Fed

• NZD/USD attracts some sellers amid a modest USD bounce from a multi-month low.
• Fed rate cut bets should cap any meaningful USD gains and lend support to the pair.
• Traders might also opt to wait for the outcome of a two-day FOMC policy meeting.

The NZD/USD pair meets with some supply on Wednesday and moves away from the year-to-date (YTD) top, around the 0.5830 region touched the previous day. The selling bias picks up pace during the early European session and drags spot prices below the 0.5800 mark in the last hour.

The US Dollar (USD) gains some positive traction and for now, seems to have snapped a three-day losing streak to a five-month low, which, in turn, is seen as a key factor exerting downward pressure on the NZD/USD pair. The intraday USD uptick could be attributed to some repositioning trade ahead of the key central bank event risk - the outcome of a two-day FOMC meeting. Adding to this, the risk of a further escalation of geopolitical tensions in the Middle East further benefits the safe-haven buck and contributes to driving flows away from the perceived riskier Kiwi.

Any meaningful USD appreciation, however, seems elusive in the wake of the growing acceptance that the Fed would lower borrowing costs several times this year amid concerns over a tariff-driven US economic slowdown. Hence, the market focus will remain glued to the Fed's updated economic projections, which include the so-called do pot. Apart from this, Fed Chair Jerome Powell's remarks would be scrutinized for cues about the future rate-cut path, which, in turn, will influence the USD price dynamics and help in determining the near-term trajectory for the NZD/USD pair. 

Hence, it will be prudent to wait for strong follow-through selling before confirming that the currency pair's recent move-up witnessed over the past two weeks or so has run its course and positioning for deeper losses. Even from a technical perspective, this week's sustained breakout above the 0.5760 strong horizontal barrier favors bullish traders and supports prospects for the emergence of some dip-buying. This, in turn, should help limit the downside for the NZD/USD pair.