NZD/USD consolidates in range around 0.6000, looks vulnerable amid bullish USD

• NZD/USD is struggling to gain significant traction and is trading in a range on Thursday.
• Expectations of an aggressive rate hike from the Fed revive demand for the dollar and act as a headwind for the pair.
• A positive risk tone appears to be the only factor lending support to the pair.

The pair NZD/USD it is struggling to take advantage of the previous day’s modest rebound from the 0.5975 area and is range bound at the start of the European session on Thursday. The pair is currently hovering around the psychological level of 0.6000 and it remains near its lowest level since May 2020 touched the previous day.

The signs of stability in the stock markets turn out to be a key factor offering some support to the risk-sensitive NZD. Having said that, the appearance of new purchases around the US dollar acts as a headwind for the NZD/USD pair. Tuesday’s US CPI report raised expectations for more aggressive Fed policy tightening, which in turn continues to support the dollar.

The implied odds of a 1% increase at the next FOMC meeting on September 20-21 are currently at 30%.. In addition, markets expect the Fed to carry out another 75 basis point rate hike in November. This remains supportive of elevated US Treasury yields and favors USD bulls, supporting the prospects for further NZD/USD decline.

Having said that, positive risk tone caps safe-haven US dollar gains, and warrants some caution on the part of aggressive traders. Market participants now await the US economic docket, with retail sales figures, weekly jobless claims, regional manufacturing indices and industrial production data during the American session.

This, coupled with US bond yields and broader risk sentiment, could influence dollar price action and provide some momentum to the NZD/USD pair. However, attention remains focused on next week’s FOMC monetary policy meeting.

NZD/USD technical levels