The NZD/USD pair continues to face heavy selling pressure for the second consecutive day on Friday, dropping to over a one-week low during the early European session. The pair remains down over 0.60% for the day, trading around the 0.6260-0.6250 area.
This comes after a sharp retracement slide from the 0.6385 region, or nearly three-month high. Despite this, the pair shows some resilience below a technically significant 200-day Simple Moving Average (SMA).
Mixed Chinese inflation data and a weaker US labor market report released on Thursday have raised concerns about a global economic slowdown, which is seen as a key factor driving flows away from the risk-sensitive Kiwi.
However, a softer US Dollar and a modest uptick in the US equity futures have limited fresh bearish bets around the NZD/USD pair. Furthermore, expectations for further rate hikes by the Reserve Bank of New Zealand (RBNZ) have provided some support to the major currency.
Investors are uncertain about the Federal Reserve’s (Fed) next policy move, which has likely kept the USD downtick cushioned. While the US CPI report released on Wednesday pointed to easing inflationary pressures, investors remain divided over the possibility of a rate cut later this year.
This acts as a tailwind for the US Treasury bond yields, which should limit the USD losses and cap any intraday recovery for the NZD/USD pair.
Traders need to wait for a break and acceptance below the 200 DMA before placing fresh bearish bets, as the aforementioned fundamental backdrop supports prospects for a further near-term depreciating move.
Market participants are now looking to the release of the Preliminary Michigan Consumer Sentiment Index from the US later during the early North American session.
This, along with the broader risk sentiment and the US bond yields, will influence the USD price dynamics and provide some impetus to the NZD/USD pair.
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