NZD/USD recovers on improving sentiment and USD weakness

• The NZD/USD pair bounces from a daily low of 0.5919 to 0.5977, driven by increased risk appetite and a weaker US dollar.
• Mixed US economic data and hawkish but cautious comments from Fed officials fail to boost the Dollar, with the DXY slightly higher at 105.47.
• Next week’s economic indicators, such as Consumer Confidence and Core CPI in the US, and Business and Consumer Confidence in New Zealand, will be in focus.

He New Zealand dollar (NZD) rebounds against the US Dollar (USD) ahead of the weekend as investor sentiment improves, while the Dollar trades lower, hurt by falling US Treasury yields. The NZD/USD pair is trading at 0.5977 after bouncing from a daily low of 0.5919.

Kiwi recovers 0.5977, USD weakens on falling Treasury yields and mixed PMIs

Wall Street is trading higher thanks to improved risk appetite. S&P Global showed that business activity in the United States (US) remained almost unchanged in September. The S&P Global manufacturing PMI improved to 48.9 from 47.9 the previous month, beating estimates but remaining in contractionary territory, while the services PMI fell to 50.2 from 50.5 in July, below forecasts. The composite index, which provides a snapshot of business activity, came in at 50.1, in line with estimates but down from 50.2 in August.

Separately, US central bank officials had let loose, with Boston Fed President Susan Collins saying further tightening is possible, although “patience” is required. Echoing some of her comments, Fed Governor Michell Bowman sounded more decisive, saying more rate hikes are necessary to control inflation.

Although the comments from Fed officials were hawkish, the Dollar failed to gain traction. The Dollar Index (DXY), which measures the value of the dollar against its peers, rose just 0.09% to 105.47, after falling from a high of 105.78. US Treasury yields continued to weaken at the short and long end of the curve.

In New Zealand (NZ), data revealed in Friday’s session that consumer confidence weakened in the third quarter regarding the economic outlook, with the index falling to 80.2 from 83.1. The agenda revealed that the trade balance showed an improvement in the annual trade deficit to 15.54B for August from -15.88B from previous figures.

For next week, the US economic agenda will include Conference Board (CB) Consumer Confidence, Durable Goods Orders, Initial Jobless Claims and the Fed’s preferred inflation gauge, the Core PCE. For its part, in New Zealand business data and consumer confidence will be published.

NZD/USD Price Analysis: Technical Outlook

The pair bottomed around 0.5859, and since then, NZD/USD has staged a comeback despite the recent strength of the US Dollar. Over the past three days, the currency pair has remained volatile, unable to gain a clear direction, although it remains slightly tilted to the downside. However, further rises are expected if buyers push the rate above the September 1 high at 0.6015. On the contrary, sellers must reclaim the September 21 low at 0.5895.