NZD/USD bears are hunting down 0.6450 into the NA close

NZD/USD is on the way to a key support area with the US Dollar gathering pace in the North American session with eyes on 0.6450 having dropped from a high of 0.6537. The pair has reached a low of 0.6462 so far.

The Federal Reserve, Fed, yesterday concluded with a dovish tilt that sank the US Dollar to fresh bear cycle lows of 100.82 as per the DXY index that followed the Federal Reserve's chairman Jerome Powell's dovish comments. Markets jumped on he his statement that said he was seeing signs of disinflation. However, it was shortlived as the European Central Bank was not as hawkish as the bulls were hoping for, sinking the Euro and propelling the greenback into a forcible correction.  The ECB raised key rates 50bp taking the MRO to 3.0%, and indicated it expects a repeat in March. Thereafter, any further hikes will be data-dependent the central bank said. Given the stretch positioning, however, the euro needed more from the event to stay up. ''EUR long positioning sits near the top of our tracking indicator, leaving it vulnerable to lofty market expectations,'' analysts at TD Securities said.

Looking ahead it will now be all about the Nonfarm Payrolls and as analysts at ANZ Bank explained, markets are clearly in no mood to embrace any hawkishness, ''and that could be a real limiting factor for the USD, they argued.'' Friday's Nonfarm Payrolls event will be a critical component of the US interest rate outlook and will drive sentiment in this regard.

Analysts at TD Securities are projecting payroll gains to have stayed largely unchanged vs December, posting a still solid 220k increase in January. ''Both the Unemployment Rate and average hourly earnings should have remained steady: the former at a decades-low 3.5%, and the latter printing a 0.3% MoM gain,'' the analysts explained. ''Note that the January jobs report will also include important revisions to the establishment survey data for 2022,'' they added. 

Such an outcome could provide fuel to the US Dollar's correction from the bear cycle lows. Nonetheless,  a weaker report, analysts at TD Securities warn, or an ''indication of softness will reinforce'' risk sentiment, which could be bullish for the Gold price and bearish for the US Dollar.