NZD/USD continues to decline from its two-week high, reaching a new daily low of 0.5700.

Oct 06, 2022

VOT Research Desk

In the face of new USD purchasing, the NZD/USD pair declines from a nearly two-week high reached earlier this Thursday.

The dollar is still rising due to bets on the Fed raising interest rates more aggressively and high US bond yields.

Fears of a recession influence market mood and put pressure on the risk-averse Kiwi.

For the second straight day, the NZD/USD pair fails to gain traction above the 0.5800 level and falls dramatically from a nearly two-week high achieved earlier this Thursday.

Spot prices continue to decline steadily throughout the middle of the European session, pushing them to a new daily low. Bears are watching for a sustained breach below the round number of 0.5700.

The demand for the US dollar is being revived by a number of reasons, which is putting some downward pressure on the NZD/USD pair. Investors have priced in a further massive 75 bps rate rise for November because they appear to be confident that the Fed will keep to its aggressive policy tightening course to contain inflation.

The recent hawkish remarks by many Fed members, which continue to support rising US Treasury bond rates and act as a tailwind for the USD, confirmed the bets. In addition, the existing risk-off atmosphere supports the safe-haven buck even more and helps divert flows away from the risk-sensitive kiwi. Investors are nonetheless worried that a worse global economic collapse may result from quickly rising borrowing rates. The risk attitude is also affected by the possibility of a further escalation in the conflict between Russia and Ukraine. This, in turn, benefits bearish traders and implies that the pair of the NZD/USD faces the least amount of resistance on the downside.

To avoid further losses, market investors may instead choose to withdraw their positions ahead of Friday’s release of the eagerly anticipated US monthly jobs report. The widely publicized NFP data will affect expectations for a Fed rate rise and have a significant impact on the direction of the USD in the near future. In the meanwhile, the NZD/USD pair may receive some support from Thursday’s publication of the US Weekly Initial Jobless Claims, comments by FOMC members, and overall market risk sentiment.

NZD/USD Technical Report