- NZD/USD regains positive traction on Monday amid subdued USD price action.
- Market optimism weighs on the safe-haven dollar and benefits the risk-sensitive NZD.
- Expectations that the Fed will keep rates higher for longer help limit USD losses and limit the pair’s upside.
The NZD/USD pair attracts new buying on the first day of a new week and stops Friday’s pullback from the 0.6015 zone, its highest level since August 11. The pair is trading around the 0.5950-0.5955 area at the start of the European session, up about 0.20% on the day, and is supported by dovish price action around the US dollar (USD).
The US monthly jobs report, released on Friday, was not very encouraging and says that the Fed will keep rates unchanged at its September meeting, which does not help the USD to capitalize on last week’s strong movement. , which brought it close again to the August maximum. Apart from this, optimism about China’s support measures to shore up economic growth boosts investor confidence and benefits antipodean currencies, including the New Zealand Dollar (NZD).
Indeed, China’s top economic planner, the National Development and Reform Commission (NDRC), has declared it would create a dedicated department to bolster the country’s faltering private economy. This comes after China increased local dollar liquidity and eased some mortgage rules last week, continuing to support a positive tone around equity markets. Upbeat sentiment further weakens the safe-haven dollar and benefits the risk-sensitive NZD.
However, the bullish outlook for NZD/USD appears limited, warranting some caution on the part of bulls and before positioning for any significant short-term move higher. Markets seem convinced that the Fed will keep interest rates higher for longer and continue to price in the possibility of a further 25 basis point hike later this year. This hawkish outlook remains a tailwind for the dollar and should slow the pair’s rise.
In the absence of any major economic releases and a US holiday, the aforementioned fundamental background makes it prudent to wait for strong follow-on buying to confirm that the NZD/USD has bottomed.
NZD/USD technical levels to watch
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
