NZD/USD hangs near three-week low, around mid-0.5800s amid modest USD uptick

• NZD/USD meets with a fresh supply on Tuesday amid the emergence of some USD dip-buying.
• Bets for more rate cuts by the RBNZ undermine the NZD and further exert pressure on the pair.
• Dovish Fed expectations and positive risk tone might cap the USD and lend support to the Kiwi.

The NZD/USD pair struggles to capitalize on the previous day's bounce from a technically significant 200-day Simple Moving Average (SMA) and attracts fresh sellers during the Asian session on Tuesday. Spot prices currently trade around mid-0.5800s, just a few pips above a three-week low touched on Monday.

The US Dollar Index (DXY), which tracks the Greenback against a basket of currencies, finds some support near the 97.00 mark and, for now, seems to have stalled the previous day's modest pullback from an over one-week high. A hawkish assessment of Federal Reserve (Fed) Chair Jerome Powell's remarks last Wednesday acts as a tailwind for the buck, which, in turn, is seen as a key factor exerting pressure on the NZD/USD pair.

The New Zealand Dollar (NZD), on the other hand, is pressured by rising bets for more interest rate cuts by the Reserve Bank of New Zealand (RBNZ), bolstered by the disappointing GDP print released last week. In fact, Statistics New Zealand reported that the economy contracted by 0.9% QoQ in the second quarter, reversing a 0.8% rise recorded during the March quarter and missing consensus estimates for a 0.3% drop.

Any meaningful USD appreciation, however, seems elusive amid firming expectations that the US central bank will cut interest rates two more times by the end of this year. Apart from this, a generally positive tone around the equity markets could cap the upside for the safe-haven buck. This, along with easing US-China trade tensions, could offer some support to the risk-sensitive Kiwi and limit losses for the NZD/USD pair.

Traders might also opt to move to the sidelines ahead of Fed Chair Jerome Powell's scheduled speech later during the North American session. This further makes it prudent to wait for a sustained break and acceptance below the 200-day SMA before positioning for an extension of the NZD/USD pair's recent rejection slide from the 0.6000 psychological mark, or a nearly two-month high touched last week.