- The dollar hits new highs across the board after the US data.
- August’s ISM service exceeds expectations.
- NZD/USD falls sharply and holds above 0.6000.
The NZD/USD fell further after the release of the US ISM Services Sector report and bottomed at 0.6034, the lowest level since May 2020. It then bounced back to 0.6050 trimming losses.
Upbeat US data, bad news
The ISM service sector index for August unexpectedly rose to 56.9 versus expectations of 55.1. The recovery further boosted the US dollar, which hit new highs. Stock prices on Wall Street hit new lows and US yields soared.
NZD/USD hit levels below last week’s lows. It is hovering around 0.6050, still on track for the lowest daily close in years. A clear consolidation below 0.6050 should open the doors to a test of 0.6000.
A strengthening dollar and deteriorating risk sentiment could keep NZD/USD under pressure. Also, commodity prices are falling. The Chinese yuan hit new multi-year lows against the dollar, with the USDCNH approaching 7.00.
On Wednesday, China is to release trade data for August, and Australia, second-quarter growth figures. The relevant report of the week in New Zealand will be on Thursday with the manufacturing activity for the 2nd quarter. “This reading is key to the economic outlook after 2Q real retail sales unexpectedly fell -2.3% QoQ vs. -0.9% in Q1, raising the risk that 2Q GDP 1st quarter will also contract again after -0.2% quarterly in 1st quarter,” analysts at Brown Brothers Harriman said.
Technical levels
Source: Fx Street
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