NZD/USD looks to approach 0.5950, Greenback recovers on risk-off mood

• NZD/USD trades lower due to the recovery in the US Dollar.
• The Mid-East tension could drive the capital flows into the safe haven assets.
• Market sentiment toward the Fed’s prolonging interest rates higher is bolstering the Greenback.

NZD/USD halts the three-day winning streak, trading in the negative territory near 0.5970 during the European session on Monday. The pair is facing downward pressure as the US Dollar (USD) rebounds on risk-off mood.

The Reserve Bank of New Zealand (RBNZ) decided to keep the Official Cash Rate (OCR) unchanged at 5.5% in a monetary policy meeting on Wednesday, aligning with widespread expectations.

The committee concurred that interest rates might need to be upheld at a restrictive level for a more prolonged duration, as mentioned in the RBNZ statement, which might have helped the Kiwi pair.

The release of US Nonfarm Payrolls data on Friday had an impact on the NZD/USD pair, initially putting pressure on it, but ultimately concluding the previous session on a positive note.

The September jobs reported a hike of 336K jobs, exceeding the market's anticipation of 170K. The revised figure for August was 227K. Nevertheless, the US Average Hourly Earnings (MoM) remained unchanged at 0.2% in September, falling short of the expected 0.3%. On an annual basis, the report indicated a decrease of 4.2%, below the expected consistent figure of 4.3%.

The conflict between Hamas and Israel is closely monitored by the markets. Any escalation could introduce geopolitical uncertainties that could reverberate across global markets.

The US Dollar Index (DXY) has rebounded after three consecutive days of losses, propelled by optimistic US Treasury yields. The DXY trades around 106.50 at the time of writing.

US Treasury yields have rebounded, influenced by expectations that the Federal Reserve (Fed) will maintain higher interest rates for an extended period. The 10-year US Treasury bond yield has once again reached 4.80%, near its peak since 2007.

Investors are likely to watch the upcoming FOMC meeting minutes scheduled for Wednesday. This release is expected to shape expectations regarding the Federal Reserve's next policy move, potentially influencing demand for the Greenback. This development could serve as a fresh directional catalyst for the NZD/USD pair.

Furthermore, there could be a keen focus on the US Core Producer Price Index later in the week, as it holds a pivotal role in assessing inflationary trends and economic conditions within the United States.