- NZD/USD finds itself in fresh supply on Thursday and is under pressure from a combination of factors.
- Bets on the Fed rate hike cause a further rise in US bond yields and revive demand for dollars.
- The risk-off momentum also underpins the safe-haven dollar and weighs on the risk-sensitive kiwi.
The pair NZD/USD comes under fresh selling pressure on Thursday and reverses part of the overnight bounce from its lowest level since March 2020. The pair maintains its bid tone during the early part of the European session and is currently trading near the daily low, just above 0.5650.
Following the previous day’s dramatic turnaround from a fresh 20-year high, the US dollar is regaining strong positive traction and is proving to be a key factor putting downward pressure on the NZD/USD pair. A nice rebound in US Treasury yields, bolstered by expectations of faster rate hikes from the Fed, acts as a tailwind for the dollar.
Investors seem convinced that the Fed will maintain its aggressive policy of tightening to combat persistent inflation. These bets were bolstered by recent hawkish comments from a number of FOMC members. This, coupled with a new wave of global risk aversion, underpins the safe-haven dollar and weighs on the risk-sensitive kiwi.
Market sentiment remains fragile amid growing concerns that rapidly rising borrowing costs will trigger a deeper global economic downturn. In addition, the risk of a further escalation of the conflict between Russia and Ukraine weighs on global risk sentiment, reflected in a sea of ​​red on global equity markets.
Market participants are now awaiting the US economic docket, in which the final report on GDP for the second quarter and the usual weekly data on initial jobless claims will be released. This coupled with speeches from influential FOMC members and US bond yields will boost USD demand and produce some trading opportunities around the NZD/USD pair.
Technical levels to watch
Source: Fx Street
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