NZD/USD hangs near daily low, just above mid-0.5600s ahead of US GDP/Jobless Claims

• NZD/USD meets with a fresh supply on Thursday and is pressured by a combination of factors.
• Fed rate hike bets trigger a fresh leg up in the US bond yields and revive the USD demand.
• The risk-off impulse also underpins the safe-haven buck and weighs on the risk-sensitive kiwi.

The NZD/USD pair comes under renewed selling pressure on Thursday and reverses a part of the overnight bounce from its lowest level since March 2020. The pair maintains its offered tone through the early part of the European session and is currently trading near the daily low, just above mid-0.5600s.

Following the previous day's dramatic turnaround from a new 20-year peak, the US dollar regains strong positive traction and turns out to be a key factor exerting downward pressure on the NZD/USD pair. A goodish pickup in the US Treasury bond yields, bolstered by expectations for faster rate hikes by the Fed, acts as a tailwind for the greenback.

Investors seem convinced that the Fed will stick to its aggressive policy tightening path to combat stubbornly high inflation. The bets were reaffirmed by the recent hawkish comments by a slew of FOMC members. This, along with a fresh wave of the global risk-aversion trade, underpins the safe-haven buck and weighs on the risk-sensitive kiwi.

The market sentiment remains fragile amid growing worries that rapidly rising borrowing costs will lead to a deeper global economic downturn. Apart from this, the risk of a further escalation in the Russia-Ukraine conflict takes its toll on the global risk sentiment, which is evident from a sea of red across the global equity markets.

Market participants now look forward to the US economic docket, featuring the release of the final Q2 GDP report and the usual Weekly Initial Jobless Claims data. This, along with speeches by influential FOMC members and the US bond yields, will drive the USD demand and produce some trading opportunities around the NZD/USD pair.

Technical levels to watch