- NZD/USD reversed an intraday dip to the 0.6925 region amid a modest USD weakness.
- Hawkish Fed expectations should help limit the USD losses and cap the upside for the pair.
- The risk-off mood might hold bulls from placing fresh bets around the perceived riskier kiwi.
The NZD/USD pair bounced over 25 pips from daily lows, albeit lacked any follow-through buying beyond mid-0.6900s.
Following the previous day's pullback from multi-day tops, the NZD/USD pair attracted some dip-buying near the 0.6925 region on Tuesday and was supported by a modest US dollar weakness. That said, a combination of factors held bulls from placing aggressive bets and kept a lid on any meaningful upside for the pair, at least for the time being.
In the absence of any fresh fundamental catalyst, prospects for an early policy tightening by the Fed should continue to act as a tailwind for the greenback. Despite Friday's disappointing headline NFP print for September, investors seem convinced that the Fed will begin rolling back its massive pandemic-era stimulus as soon as November.
The markets might have also started pricing in the possibility of an interest rate hike in 2022 amid worries that the recent surge in crude oil/energy prices will stoke inflation. Apart from this, the risk-off impulse in the markets could further benefit the safe-haven greenback and cap any further gains for the perceived riskier kiwi.
Worries of a faster than expected rise in inflation and signs of a slowdown in the global economic recovery have been fueling concerns about stagflation. This, along with the contagion risks from China Evergrande's debt crisis, took its toll on the global risk sentiment, which was evident from a corrective pullback in the equity markets.
Even from a technical perspective, the NZD/USD pair has been oscillating in a familiar trading range over the past one week or so. This further makes it prudent to wait for a sustained break in either direction before placing aggressive bets amid a relatively thin US economic docket, featuring the release of August JOLTS Job Openings data.
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. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD dips below 0.6600 following RBA’s decision
The Australian Dollar registered losses of around 0.42% against the US Dollar on Tuesday, following the RBA's monetary policy decision to keep rates unchanged. However, it was perceived as a dovish decision. As Wednesday's Asian session began, the AUD/USD trades near 0.6591.
EUR/USD edges lower to near 1.0750 after hawkish remarks from a Fed official
EUR/USD extends its losses for the second successive session, trading around 1.0750 during the Asian session on Wednesday. The US Dollar gains ground due to the expectations of the Federal Reserve’s prolonging higher interest rates.
Gold wanes as US Dollar soars, unfazed by lower US yields
Gold price slipped during the North American session, dropping around 0.4% amid a strong US Dollar and falling US Treasury bond yields. A scarce economic docket in the United States would keep investors focused on Federal Reserve officials during the week after last Friday’s US employment report.
FTX files consensus-based plan of reorganization, awaits bankruptcy court approval
FTX has filed a consensus-based plan for its reorganization, coming almost two years after the now defunct FTX filed for Chapter 11 Bankruptcy Protection in the District of Delaware.
Living vicariously through rate cut expectations
U.S. stock indexes made gains on Tuesday as concerns about an overheating U.S. economy ease, particularly with incoming economic reports showing data surprises at their most negative levels since February of last year.