NZD/USD remains depressed near YTD low, seems vulnerable below 200-day SMA

• NZD/USD languishes near the YTD low and seems vulnerable to decline further.
• Hawkish Fed expectations, elevated US bond yields act as a tailwind for the USD.
• Looming recession risks, acceptance below the 200-day SMA favour bearish traders.

The NZD/USD pair comes under fresh selling pressure on Tuesday and drops closer to a nearly three-month low touched the previous day. Spot prices manage to bounce back to mid-0.6100s during the first half of the European session, though the near-term bias remains tilted in favour of bearish traders.

The US Dollar stalls the overnight pullback from a seven-week high amid rising US Treasury bond yields, bolstered by hawkish Fed expectations. In fact, the markets seem convinced that the US central bank will stick to its hawkish stance in the wake of stubbornly high inflation. This, in turn, favours the USD bulls and supports prospects for an extension of the near-term depreciating move for the NZD/USD pair.

Apart from this, a generally weaker risk tone should act as a tailwind for the safe-haven Greenback and contribute to driving flows away from the risk-sensitive Kiwi. The market sentiment remains fragile amid worries about economic headwinds stemming from rapidly rising borrowing costs. This, along with geopolitical tensions, keeps a lid on the overnight optimistic move in the global equity markets.

The NZD/USD pair, meanwhile, now seems to have found acceptance below a technically significant 200-day Simple Moving Average (SMA). This adds credence to the near-term negative outlook and suggests that the path of least resistance for spot prices is to the downside. Traders now look to the US macro data - regional Manufacturing PMIs and the Conference Board's Consumer Confidence Index - for a fresh impetus.

Technical levels to watch