NZD/USD drops towards 0.5940 ahead of the US key data

• NZD/USD loses momentum below the mid-0.5900 amid the cautious mood.
• New Zealand’s Building Permits for July fell 5.2% from an increase of 3.4% in the previous month.
• Market players await the US ADP private employment, US prelim GDP Q2 ahead of the US Nonfarm Payrolls.

The NZD/USD pair extends its downside after reaching 0.5977 during the early European trading hours on Wednesday. As of writing, the pair is trading around 0.5947, losing 0.41% on the day.

Markets turn to a cautious mood ahead of the key US economic data released, even though the US Dollar reversed from its recovery and drops below 103.60. That said, the Conference Board's (CB) Consumer Confidence Index dropped to 106.10 in August from 114.00 in July, missing the market consensus of 116.0. Meanwhile, the US Job Openings and Labor Turnover Survey (JOLTS) for July showed the lowest reading since March 2021 by decreasing to 8.827M versus 9.165M prior and against the 9.465M expected. The S&P/Case-Shiller Home Price Indices rose to -1.2% YoY versus -1.7% prior and -1.2% expected.

Federal Reserve (Fed) Chairman Jerome Powell remarked last week that the central bank will leave the door open for a potential additional rate hike, depending on the incoming data. The condition of the labor market may influence the USD's short-term direction. Investors will take cues from the US labor data due later this week, which could trigger volatility in the FX market.

On the Kiwi front, a Reserve Bank of New Zealand (RBNZ) policymaker stated that the central bank might cut the interest rate sooner than signaled if China experienced a more noticeable contraction than the RBNZ anticipates.

About the data, Statistics New Zealand showed that the total number of Building Permits for July fell 5.2% from an increase of 3.4% in the previous month. The figure came in below the market expectation of a 0.2% rise.

Furthermore, the headlines surrounding the US-China relationship remain in the spotlight. The exacerbating tension between the world’s two largest economies should dampen market optimism and cap the upside of the China-proxy Kiwi.

Later in the day, the US ADP private employment and estimate Q2 Gross Domestic Product (GDP) data will be released. The closely watched event this week will be the Nonfarm Payrolls (NFP) data on Friday. Traders will find trading opportunities around the NZD/USD pair.