- NZD/USD continues to lose ground for the fifth consecutive day and is approaching the monthly low.
- Aggressive expectations from the Fed and rising US bond yields underpin the dollar and put pressure on the pair.
- Recession fears also benefit the safe-haven dollar and keep flows away from the risk-sensitive kiwi.
The pair NZD/USD remains under strong selling pressure for the fifth day in a row on Friday and falls to a new monthly low during the first half of the European session. The pair has retraced more than 250 pips from the two-month highs hit last week and is currently sitting just above the 0.6200 round level.
US dollar buying remains steady on the last day of the week and proves to be a key factor continuing to put downward pressure on the NZD/USD pair. Indeed, the dollar index (DXY), which tracks the greenback against a basket of six other currencies, rises to a one-month high amid expectations that the Fed will maintain its path of monetary policy tightening. .
Bets were bolstered by recent comments from Federal Reserve officials and by upcoming positive US macroeconomic releases. This, in turn, continues to favor a further rise in US Treasury yields. Furthermore, risk-on momentum – amid growing recession fears – is propping up the safe-haven dollar and driving flows away from the risk-sensitive kiwi.
The combination of the above factors offsets the Reserve Bank of New Zealand’s fourth rate hike of 50 basis points on Wednesday and the prospect of bringing forward the timing of further rate hikes. Even RBBZ Governor Adrian Orr’s hawkish comments fail to impress bulls or relieve bearish pressure, suggesting the path of least resistance for NZD/USD is to the downside.
There will be no major US economic releases on Friday, leaving the dollar at the mercy of US bond yields. Aside from this, broader risk sentiment would look to grab short-term opportunities around the NZD/USD pair. However, spot prices continue to post heavy weekly losses and appear vulnerable to a further decline.
Technical levels
Source: Fx Street
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