NZD/USD faces headwinds amid souring market sentiment, hawkish Fed stance

• NZD/USD is set to remain fragile amidst mixed market sentiment in the US.
• Federal Reserve officials, led by Minnesota’s Fed President Neil Kashkari, maintain a hawkish stance, foreseeing potential rate hikes and a 60% probability of a soft landing.
• Economic data in focus: NZ Business Confidence, while the US Docket would feature GDP Q2 revisions Fed speakers.

The New Zealand Dollar (NZD) lost ground versus the US Dollar (USD) late in the New York session after hitting a daily high of 0.5956 but erased those gains on sour market sentiment spurred by developments in the United States (US). Hence, the NZD/USD is trading at 0.5922, down by 0.37%.

New Zealand Dollar (NZD) struggles against the robust US Dollar (USD) as market participants weigh in on US economic developments and Federal Reserve signals

Market sentiment remains fragile, as investors jumped and lifted two of the three major equity indices in the United States (US), shifting mood mixed. Nevertheless, US Treasury bond yields remain near the year's highs, while the US Dollar Index (DXY) retreats from the year-to-date (YTD) high reached at 106.83 to 106.62, gains 0.42%.

Federal Reserve officials remain hawkish, with Minnesota’s Fed President Neil Kashkari continuing his parade on Wednesday. Summarizing what he has said, he remains hawkish, foresees at least one more rate hike, and sees a 60% probability of achieving a soft landing. Kashkari added that he expects the Fed to hold rates “steady” for 2024.

Before Wall Street opened, the US Department of Commerce revealed that August’s Durable Goods Orders rose more than expected, at 0.2% MoM, with estimates for a -0.2% plunge. Excluding Transports, the so-called core came at 0.4% MoM, above estimates and the previous month's 0.1% expansion.

In the meantime, the Kiwi (NZD) is taking some cues on the latest inflation figures from Australia, which, although coming as expected at 5.2%, failed to underpin the antipodeans. Therefore, sellers piled in and dragged prices towards the low of the week at 0.5899 before reversing its course, and hovering at around current exchange rates.

Ahead in the week, traders would take some clues on New Zealand’s (NZ) ANZ Business Confidence alongside Australia’s Retail Sales. On the US front, the final revision of Q2’s Gross Domestic Product (GDP), Pending Home Sales, Initial Jobless Claims, and Fed speakers. By Friday, the Fed’s preferred gauge for inflation, the Core PCE, would be announced.

NZD/USD Price Analysis: Technical outlook

After forming a bearish-engulfing candlestick pattern, the NZD/USD dropped to a new four-day low of 0.5899, but buyers stepping at the 0.5900 figure lifted the pair. Despite its bearish bias, the pair must reclaim the September 5 swing low of 0.5859, to register a new cycle low that could extend the downtrend and open the door to challenge the November 3, 2022, low of 0.5740. On the upside, the NZD/USD's first resistance would be 0.5950, followed by the 50-day moving average (DMA) at 0.5996.