NZD/USD retreats from 200-day SMA/two-week top; slides to 0.5830 amid USD uptick

• NZD/USD retreats from a nearly two-week high amid a modest USD uptick.
• A cautious market mood also drives flows away from the risk-sensitive Kiwi.
• Fed rate cut bets and the US government shutdown might cap the Greenback.

The NZD/USD pair faces rejection near a technically significant 200-day Simple Moving Average (SMA) near the 0.5845 region, or a nearly two-week high touched the previous day, and drifts lower during the Asian session on Tuesday. Spot prices currently trade around the 0.5830 region, down 0.20% for the day, and now seem to have stalled the recent recovery from the lowest level since April set in September.

The US Dollar (USD) trades with a positive bias for the second consecutive day and continues to draw support from a broadly weaker Japanese Yen (JPY). Apart from this, a cautious tone around the US equity futures further benefit the Greenback's relative safe-haven status and is seen as a key factor exerting some downward pressure on the risk-sensitive Kiwi. The USD uptick, however, lacks bullish conviction amid dovish Federal Reserve (Fed) expectations, which, in turn, could act as a tailwind for the NZD/USD pair.

According to the CME FedWatch tool, the possibility of a 25-basis-point interest rate cut by the US Federal Reserve in October and December stands at around 95% and 84%, respectively. Furthermore, concerns that a prolonged US government shutdown could potentially disrupt economic activity hold back the USD bulls from placing aggressive bets. Hence, strong follow-through selling before is needed to confirm that the NZD/USD pair's upward trajectory witnessed over the past two weeks or so has run out of steam.

Meanwhile, rising bets for more interest rate cuts by the Reserve Bank of New Zealand (RBNZ) make it prudent to wait for a sustained strength and acceptance above the 200-day SMA hurdle before positioning for any further gains. Traders now look forward to speeches from influential FOMC members, including Fed Chair Jerome Powell's appearance on Thursday. Apart from this, FOMC Minutes on Wednesday could offer cues about rate cuts, which will drive the USD and provide a fresh impetus to the NZD/USD pair.