NZD/USD sticks to gains near multi-week high, just below 0.5900 ahead of US ISM PMI
|- A combination of factors lifts NZD/USD to a six-week high on Tuesday.
- Bets for a less hawkish Fed and sliding US bond yields weigh on the USD.
- A positive risk tone provides an additional lift to the risk-sensitive kiwi.
The NZD/USD pair builds on the previous day's bounce from the 0.5775 region and gains strong follow-through traction for the second successive day on Tuesday. This also marks the fifth day of a positive move in the previous six and lifts spot prices to the 0.5900 neighbourhood, or the highest level since September 21.
The US dollar stalls its recent bounce from over a one-week low touched last week and snaps a three-day winning streak, which, in turn, provides a goodish lift to the NZD/USD pair. Speculations that the Fed will soften its hawkish stance amid signs of a slowdown in the US economy led to a further decline in the US Treasury bond yields. This, along with a generally positive tone around the equity markets, is seen undermining the safe-haven buck and benefitting the risk-sensitive kiwi.
The better-than-expected Chinese Caixin Manufacturing PMI, which improved to 49.2 in October from 48.1 previous, boosted investors' confidence and led to a goodish recovery in the global risk sentiment. Investors, however, remain concerned about the economic headwinds stemming from China's strict zero-COVID policy amid the resurgence of new cases in Shanghai and Wuhan. Apart from this, the protracted Russia-Ukraine war should keep a lid on any further optimistic moves in the markets.
Furthermore, firming expectations that the Fed will hike interest rates by 75 bps at the end of a two-day policy meeting on Wednesday should act as a tailwind for the US bond yields and the greenback. This, in turn, warrants some caution for aggressive bullish traders and positioning for any further appreciating move for the NZD/USD pair. Traders now look to the release of the US ISM Manufacturing PMI for some impetus later during the early North American session.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.