- NZD/USD moves lower on Tuesday, although the decline remains supported amid a softer dollar.
- Recession fears and US-China tensions appear to act as a headwind for the risk-sensitive NZD.
- Falling US bond yields keep dollar bulls on the defensive and should help limit deeper losses in the pair.
The pair NZD/USD has difficulty taking advantage of the positive movement of the previous day and attracts some selling near the 0.6300 level on Tuesday. The pair moves lower throughout the European session and falls to a fresh daily low around the 0.6270 area in the last hour.
The growing concern about a global economic downturn, coupled with tensions between the US and China around Taiwan, check the recent bullish movement of the markets and act as a headwind for the NZDrisk sensitive. That said, the softer tone surrounding the US dollar offers some support to the NZD/USD pair and should help limit any deeper losses.
The flight to the safe haven continues to put downward pressure on US Treasury yields, which in turn is seen as weighing on the dollar. Having said that, speculation that the Fed will maintain its aggressive tightening policybolstered by Friday’s positive employment report, support the prospect of some dollar buying.
In fact, markets are pricing in 70% chance that the Fed will raise interest rates by 75 basis points at its September meeting. Expectations were bolstered by Fed Governor Michelle Bowman’s remarks on Saturday that the US central bank should consider more hikes of 75 basis points at upcoming meetings to reduce inflation.
Therefore, the market’s attention will continue to focus on the latest US CPI consumer inflation figures to be released on Wednesday. The CPI report will be considered for further clues on the Fed’s monetary policy path. This, in turn, would play a key role in influencing short-term dollar price dynamics and determining the path of the pair. NZD/USD.
Meanwhile, investors may prefer to stay on the sidelines in the absence of relevant economic releases. Even from a technical standpoint, recent range-bound price action over the past two weeks points to traders’ indecision and warrants some caution before opening aggressive positions around the NZD/USD pair.
NZD/USD technical levels
Source: Fx Street
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