NZD/USD lacks firm intraday direction, remains below 0.6000 ahead of US ISM PMI/Fed's Powell

• NZD/USD struggles to gain traction and is influenced by a combination of diverging factors.
• The risk-on impulse caps gains for the safe-haven USD and benefits the risk-sensitive Kiwi.
• Bets for one more rate hike by the Fed in 2023 act as a tailwind for the buck and keep a lid.

The NZD/USD pair lacks any firm intraday direction on Monday and seesaws between tepid gains/minor losses through the first half of the European session. Spot prices currently trade below the 0.6000 psychological mark, though remain well within the striking distance of a nearly two-month high touched on Friday.

A generally positive tone around the equity markets is seen undermining the US Dollar's (USD) relative safe-haven status and benefitting the risk-sensitive Kiwi. The official Chinese PMIs released over the weekend showed that business activity in the manufacturing sector recorded growth for the first time in six months and the services sector remained in expansion territory during September. This, along with the passage of a stopgap funding bill to avert a US government shutdown, overshadows a slight disappointment from the private Chinese PMI prints and boosts investors' confidence.

That said, a fresh leg up in the US Treasury bond yields, bolstered by the prospects for further policy tightening by the Federal Reserve (Fed), acts as a tailwind for the Greenback and caps the upside for the NZD/USD pair. Investors seem convinced that the US central bank will stick to its hawkish stance and have been pricing in the possibility of one more lift-off by the year-end. Even the US PCE Price Index data released on Friday, which indicated that the underlying inflation moderated in August, did little to change the market view that the Fed will keep rates interest higher for longer.

The aforementioned mixed fundamental backdrops hold back traders from placing aggressive directional bets around the NZD/USD pair and leading to subdued ragen-bound price action on the first day of a new week/month/quarter. Market participants now look to the release of the US ISM Manufacturing PMI, which, along with the US bond yields and the broader risk sentiment, might drive the USD demand. Apart from this, scheduled speeches by influential FOMC members, including Fed Chair Jerome Powell, should produce short-term trading opportunities around the NZD/USD pair.

Technical levels to watch