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NZD/USD comes under some fresh selling pressure, although there is no follow-through.
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Recession fears benefit the safe-haven USD and weigh on the risk-sensitive Kiwi.
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The Fed’s less hawkish outlook caps the buck and lends some support to the pair.
The NZD/USD pair meets with a fresh supply on Thursday and maintains its offered tone through the first half of the European session. The pair has now reversed a major part of the previous day’s positive move and is currently placed near the lower end of its daily range, around the 0.6280-0.6275 region.
The intraday downtick for the NZD/USD pair can be attributed to a softer tone around equity markets, benefiting the safe-haven US dollar and weighing on the risk-sensitive New Zealand dollar. Despite easing of strict COVID-19 restrictions in China, concerns of a deep global economic slowdown continue to weigh on investor sentiment.
That said, the prospect of a small Fed rate hike is keeping traders from placing new bullish bets around the USD and lending some support to the NZD/USD pair, at least for now. Indeed, minutes of the December FOMC policy meeting released Wednesday showed that officials unanimously supported raising borrowing costs at a slower pace.
The Fed’s less hawkish outlook keeps the US Treasury bond yields depressed near a multi-week low and acts as a headwind for the greenback. This makes it prudent to wait for some follow-through selling before positioning for an extension of the NZD/USD pair’s pullback from levels beyond the 0.6500 psychological mark, or the highest since June 2022 touched last month.
Traders now look to the US economic docket, featuring the release of the ADP report on private-sector employment and the usual Weekly Initial Jobless Claims. This, along with the US bond yields and the broader risk sentiment, will drive the USD demand and provide some impetus to the NZD/USD pair. The focus, however, will remain glued to the US jobs report (NFP), due on Friday.
Technical levels to watch
NZD/USD
