• NZD/USD gains strong positive traction on Tuesday and climbs to over a one-week high.
• A modest USD downtick lends some support to the pair, though the upside seems limited.
• Traders now await the quarterly jobs data from NZ ahead of the FOMC on Wednesday.

The NZD/USD pair regains positive traction on Tuesday and builds on its steady intraday ascent through the early part of the European session. The momentum lifts spot prices to a one-and-half-week high in the last hour, with bulls now looking to build on the momentum further beyond the 0.6200 round-figure mark.

The US Dollar (USD) edges lower and erodes a part of the overnight positive move back closer to a nearly two-week high touched on Friday, which, in turn, is seen as a key factor lending some support to the NZD/USD pair. Traders, however, might refrain from placing aggressive bearish bets around the USD amid the uncertainty over the Federal Reserve's (Fed) rate hike path. This, along with looming recession risks, might keep a lid on any meaningful gains for the risk-sensitive Kiwi, at least for the time being.

In fact, the markets have fully priced in another 25 bps lift-off at the end of the two-day FOMC meeting on Wednesday and expect the US central bank to pause its rate-hiking cycle beyond May. That said, the US ISM Manufacturing PMI released on Monday indicated that there was a build-up of inflation pressures last month and lifted the possibility of a further rate hike in June. This, in turn, led to the overnight rise in the US Treasury bond yields and might continue to lend some support to the Greenback.

Investors, meanwhile, remain worried about economic headwinds stemming from rising borrowing costs. The fears were fueled by weaker Chinese manufacturing data released on Sunday, which keeps a lid on any optimism in the markets. This could further benefit the safe-haven buck and contribute to capping the upside for the NZD.USD pair. Traders might also prefer to move on the sidelines and wait for the outcome of the two-day FOMC monetary policy meeting, scheduled to be announced on Wednesday.

Heading into the key central bank event risk, traders will take cues from Tuesday's release of the US JOLTS Job Openings data. This, along with the US bond yields and the broader risk sentiment, will influence the USD and provide some impetus to the NZD/USD pair ahead of the quarterly employment details from New Zealand on Wednesday.

Technical levels to watch