Throughout the first half of the European session, the NZD/USD was under selling pressure.
Expectations of a hawkish Fed propelled the dollar to new three-month highs, acting as a headwind.
As investors become more cautious ahead of the US monthly jobs report, the downside appears to be mitigated.
During the early European session, the NZD/USD pair remained on the defensive and was last seen lingering at two-week lows, just above the mid-0.6900s.
On Friday, the pair extended its recent slide from near the 0.7100 barrier, edging lower for the sixth straight session. The NZD/USD pair has now lost most of last week’s goodish comeback gains from YTD lows, and is being weighed down by the strong bullish mood around the US dollar.
Markets have speculated that if price pressures continue to rise, the Fed will tighten its monetary policy sooner. The market’s hopes were boosted further by the US ISM Manufacturing survey on Wednesday, which revealed that the prices paid sub-component soared to a new high of 92.1 in June, up from 88 the previous month.
As a result, the greenback continued to be underpinned, creating a headwind for the NZD/USD pair. Indeed, the main USD Index soared to new three-month highs, seemingly unfazed by falling US Treasury bond yields. Even the general risk-taking attitude did little to help the perceived riskier kiwi.
Investors, on the other hand, appeared hesitant to make any bold bets, preferring to sit on the sidelines ahead of the US monthly jobs report, which is coming later in the early North American session. This appeared to be the only thing that gave the NZD/USD pair some support and helped it avoid additional losses.
The Fed’s monetary policy outlook may be influenced by the NFP report, which will play a crucial role in shaping USD price dynamics in the near term. As a result, investors will be better able to predict the next leg of the NZD/USD pair’s directional move./n
