NZD / USD falls to month-long lows, 0.6900 again in sight

• The NZD / USD remained under some selling pressure for the second day in a row on Wednesday.
• The prevailing bullish sentiment around the USD was seen as a key factor exerting pressure.
• The risk appetite boost, the pullback in US bond yields failed to inspire the bulls or stopped the slide.

USD buying accelerated during the mid-Europe session and dragged the pair down NZD / USD to one-month lows, around the 0.6925 region in the last hour.

The pair witnessed some subsequent selling for the second day in a row and extended the bearish breakout momentum from the previous day below the key psychological level 0.7000. This also marked the third day of a negative move in the previous four and was sponsored by a widespread strength in the US dollar.

Fears of a global economic slowdown resurfaced in the wake of the intensifying energy crisis in China. This, coupled with concerns about the risks of the debt crisis in China Evergrande Group, boosted the dollar’s status as a global reserve currency and put pressure on the NZD / USD pair.

In fact, the key USD index spiked to the highest level since November 2020 and was supported by prospects for an early tightening of policy by the Fed. The Fed hinted that it will soon begin to phase out its bond purchases and the dot plot indicated the inclination of policymakers to raise rates in 2022.

USD bulls did not appear to be affected by the looming US debt ceiling and also ignored a modest pullback in US Treasury yields including the boost from risk appetite in the markets. did little to dent the bullish sentiment surrounding the USD or to support the perceived riskier kiwi.

Market participants are now looking forward to the US economic record, which features the only release of pending home sales data for August to be released later during the North American early days. However, the focus will be on the remarks by Fed Chairman Jerome Powell at the ECB Forum on Central Banking.

This, coupled with US bond yields, will influence USD price dynamics and give the NZD / USD some momentum. Traders could follow the signals of the broader market risk sentiment to seize some short-term opportunities around the pair.

Technical levels