NZD/USD sticks to softer New Zealand CPI-inspired losses around 0.5900 mark

The NZD/USD pair comes under heavy selling pressure during the Asian session on Tuesday, with bears now looking to extend the downfall further below the 0.5900 mark.

The New Zealand Dollar (NZD) weakens across the board following the release of softer consumer inflation figures from New Zealand, which showed that the headline CPI rose to 1.8% in the three months to September. Adding to this, the yearly rate decelerated to 5.6% from 6% in the previous quarter and also fell short of consensus estimates pointing to a reading of 5.9%. The data forces investors to trim their bets for an interest rate hike by the Reserve Bank of New Zealand (RBNZ) in November and is seen weighing on the NZD/USD pair.

The US Dollar (USD), on the other hand, struggles to gain any meaningful traction and remains on the defensive in the wake of the uncertainty about the Federal Reserve's (Fed) future rate hike path. The recent dovish remarks by several Fed officials ensured that the US central bank will maintain the status quo for the second successive time in November. In fact, Philadelphia Fed President Patrick Harker stated on Monday that that interest rate hikes are likely over and that the US central bank should hold rates steady in the absence of some turn in the data.

Firming expectations for a shift in the Fed's policy stance, along with the upbeat market mood,  hold back traders from placing fresh bullish bets around the safe-haven Greenback. That said, the latest US consumer inflation figures released last week kept the door open for one more Fed rate hike move by the year-end. This remains supportive of elevated US Treasury bond yields, which act as a tailwind for the USD and favours the NZD/USD bears. However, a sustained break and acceptance below the 0.5900 mark is needed to confirm the negative outlook.

Market participants now look to the US economic docket, featuring the release of monthly Retail Sales data and Industrial Production figures, due later during the early North American session. This, along with the US bond yields and the broader risk sentiment, might influence the USD and provide a fresh impetus to the NZD/USD pair. Nevertheless, the aforementioned fundamental backdrop suggests that the path of least resistance for spot prices is to the downside.

Technical levels to watch