NZD/USD stays pressured at yearly low surrounding 0.6450, focus on NZ jobs report, Fed

• NZD/USD remains depressed near yearly low, printing eight-day downtrend.
• US dollar bulls cheer hawkish expectations from Fed, safe-haven appeal of the greenback.
• RBNZ’s measured response, China’s covid woes weigh on Kiwi prices.
• US ISM Manufacturing can offer intermediate directions but risk catalysts are more important for traders to watch.

NZD/USD holds onto bearish impulse around a 20-month low, flashed the previous day, despite grinding between 0.6480 and 0.6450 since late Friday. That said, the Kiwi pair’s latest bounce-off intraday low fails to gain any appreciation as it remains well confined in the aforementioned range during the initial hour of Monday’s Asian session.

Broad US dollar strength joins China’s covid-linked lockdowns to double-down Antipodeans like NZD/USD. However, the market’s anxiety ahead of Wednesday’s New Zealand (NZ) employment report for the first quarter of 2022 and the US Federal Reserve (Fed) monetary policy meeting seems to have restricted the quote’s recent moves.

The US Dollar Index (DXY) remains around the highest levels in two decades despite snapping a six-day uptrend on Friday. Mainly underpinning the greenback’s strength are the rising odds of the Fed’s faster rate hikes and the urge for balance-sheet normalization amid roaring inflation. Also pushing the USD higher is the geopolitical tension between Ukraine and Russia, as well as between Moscow and the West, due to the greenback’s traditional safe-haven appeal.

Elsewhere, China’s covid conditions pose a big challenge to the global commodity traders due to the dragon nation’s status as the world’s largest industrial player. Recently, China’s PMIs for April came in softer than expected and prior, with the headline NBS Manufacturing PMI declining to 47.4 versus 48 forecast and 49.5 previous reading.

It’s worth noting that Beijing has also tightened measures to curb the virus spread and announced a major covid testing drive even during the festive season lasting till Wednesday.

Amid these plays, equities and riskier assets remain weak and exert downside pressure on the Antipodeans like NZD/USD while strong US Treasury yields underpin the greenback bulls.

Moving on, today’s US ISM Manufacturing PMI for April, expected 58.0 versus 57.1 prior, can offer intraday directions to NZD/USD prices. However, major attention will be given to Wednesday’s NZ jobs report as the Reserve Bank of New Zealand (RBNZ) recently sounded a bit reserved. Also, the Fed’s rate hike and push for normalization will be crucial for the pair traders to watch for clear directions.

Technical analysis

Although oversold RSI conditions restrict the short-term downside of the NZD/USD prices, buyers are less likely to take the risk until witnessing a clear break of the August 2020 low around 0.6490.

Alternatively, the June 2020 trough near 0.6390 and a descending support line from August 2021, close to 0.6370 by the press time, lure the bears.