NZD/USD snaps seven-week uptrend around mid-0.6300s as US Dollar rebounds on mixed clues

• NZD/USD fades bounce off intraday low, braces for the first weekly loss in eight.
• Downbeat milk price forecast by Fonterra, mild risk aversion adds strength to the Kiwi pair’s losses.
• Hawkish RBNZ keeps buyers hopeful despite short-term pullback.

NZD/USD retreats to 0.6342 while printing the first daily loss in three during early Thursday. In doing so, the Kiwi pair is on the way to defying the seven-week uptrend while bracing for the weekly loss.

The quote’s latest weakness could be linked to the downward revision of dairy price forecasts by the world’s biggest dairy exporter Fonterra. “New Zealand's Fonterra Co-operative Group Ltd. on Thursday lowered its farmgate milk price forecast range for the second time for the 2022/23 season on higher costs and softening demand for whole milk powder,” said Reuters. The news also mentioned that Fonterra now expects to pay farmers between NZ$8.50 and NZ$9.50 per kilogram of milk solid (kgMS), compared with NZ$8.50 to NZ$10.00 per kgMS it forecast in August.

Elsewhere, the US Dollar cheers the cautious sentiment, as well as a rebound in the US Treasury bond yields amid a sluggish session and mixed signals from China and Russia.

That said, the benchmark 10-year Treasury bond yields dropped to the lowest levels since early September by losing 3.30% on Wednesday. On the same line, the two-year counterpart dropped 2.54% amid the rush for risk safety. With this, the US Treasury bond yield curve, the difference between the long-dated and the short-term bond yields, inverted the most in over forty years and highlighted the recession woes.

On the other hand, Russian President Vladimir Putin’s threat of using nuclear weapons contrasts with the latest comments from German Chancellor Olaf Scholz suggesting easing the risks of Moscow using nuclear weapons. Furthermore, China’s gradual easing of the Zero-Covid policy appears as a passive reopening and struggles to impress the bulls. Further, Bloomberg came out with the news suggesting more tension between the US and China due to the latest bills the US Congress is up for passing. “The US is set to pass legislation revamping US policy toward Taiwan and restricting government use of Chinese semiconductors, moves that appear certain to antagonize Beijing even as President Joe Biden seeks to ease tensions,” said Bloomberg.

Amid these plays, S&P 500 Futures portray a six-day downtrend near 3,930, down 0.25% intraday at the latest.

Given the mixed concerns and the US Dollar’s rebound, as well as an absence of Fed talks ahead of next week’s Federal Open Market Committee (FOMC), NZD/USD may witness further inaction. Even so, the hawkish view of the Reserve Bank of New Zealand (RBNZ) versus the Fed’s recently dovish remarks keep the pair buyers hopeful.

Technical analysis

Although double tops surrounding 0.6470-80 challenge the NZD/USD buyers, the pair sellers remain off the table unless witnessing a clear downside break of the five-week-long support line, at 0.6315 by the press time.