The NZD/USD pair saw fresh selling pressure during the Asian session on Friday, erasing some of the modest gains made in the previous day. Spot prices dropped to a daily low near the 0.5860 region in the final hour, as traders await the release of the critical US Nonfarm Payrolls (NFP) report, which is expected to provide important direction heading into the weekend.
The NFP data is closely watched for clues regarding the Federal Reserve’s (Fed) potential rate cuts, which could influence the US Dollar (USD) dynamics and impact the NZD/USD pair. Despite a recent decline in US Treasury bond yields, which has kept the USD on the defensive near a multi-week low, expectations for a less dovish Fed are weighing on risk-sensitive currencies like the Kiwi. A softer global risk sentiment, fueled by a downbeat tone in equity markets, further supports the USD.
There is growing conviction that US President-elect Donald Trump’s policies will spur inflation, pushing the Fed to halt its rate-cutting cycle. Additionally, hawkish remarks from several members of the Federal Open Market Committee (FOMC), including Fed Chair Jerome Powell, suggest the central bank may adopt a more cautious approach. Persistent geopolitical risks are also dampening investor sentiment, which, combined with expectations of aggressive policy easing by the Reserve Bank of New Zealand (RBNZ), adds downward pressure on the NZD/USD pair.
Technically, the pair’s range-bound price action over the past three weeks suggests a bearish consolidation phase. The lack of meaningful buying and negative momentum indicators on the daily chart support the near-term bearish outlook. Any attempts at recovery are likely to face selling pressure and risk quickly losing momentum.
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