NZD/USD flat-lines around 0.6075 area, bias remains tilted in favour of bearish traders

The NZD/USD pair seesaws between tepid gains/minor losses through the Asian session and consolidates its recent decline to a five-week low touched earlier this Thursday. Spot prices currently trade around the 0.6080-0.6075 region, nearly unchanged for the day and seem vulnerable to slide further.

As investors digest the Fitch downgrade of the US credit rating, a modest recovery in the US equity futures turns out to be a key factor benefitting the risk-sensitive Kiwi and lending some support to the NZD/USD pair. A positive risk tone, meanwhile, keeps a lid on the recent US Dollar (USD) rally to its highest level since July 7, which, along with the better-than-expected China's Caixin Services PMI, acts as a tailwind for the major. That said, firming expectations that the Federal Reserve (Fed) will stick to its hawkish stance favours the USD bulls and supports prospects for an extension of the pair's three-week-old downtrend.

The US ADP report released on Wednesday showed that private-sector employers added 324K jobs in July, much higher than the 189K expected. This, along with the recent upbeat US macro data, points to an extremely resilient economy and should allow the Fed to keep interest rates higher for longer. The hawkish outlook remains supportive of elevated US Treasury bond yields and suggests that the path of least resistance for the USD is to the upside. This, in turn, adds credence to the near-term negative outlook for the NZD/USD pair and warrants some caution before placing bullish bets or positioning for any meaningful recovery.

Market participants now look forward to the US economic docket, featuring the release of the usual Weekly Initial Jobless Claims, the ISM Services PMI and Factory Orders data later during the early North American session. This, along with the US bond yields and the broader risk sentiment, might influence the USD price dynamics and produce short-term trading opportunities around the NZD/USD pair. The market focus, however, will remain glued to closely-watched US monthly employment details on Friday. The popularly known NFP report should help investors to determine the next leg of a directional move for the major.

Technical levels to watch