NZD/USD touches fresh 2023 trough, around 0.5825 area as traders look to Fed’s Powell

• NZD/USD drifts lower for the third straight day and touched its lowest level since November 2022.
• The Israel-Hamas war, hawkish Fed expectations underpin the Greenback and weigh on the major.
• Traders look to the US macro data for some impetus ahead of Fed Chair Jerome Powell’s speech.

The NZD/USD pair remains under heavy selling pressure for the third successive day – also marking the sixth day of a negative move in the previous seven – and dives to its lowest level since early November 2022 during the Asian session on Thursday. Spot prices currently trade around the 0.5825 region, down over 0.40% for the day, and seem vulnerable to prolonging the recent declining trend from the 0.6055 area, or the monthly peak touched last week.

The market sentiment remains fragile in the wake of growing concerns that the Israel-Hamas conflict could spill over into the Middle East region, especially after a Gaza hospital reportedly killed hundreds of Palestinians. This, in turn, is seen benefitting the safe-haven US Dollar (USD) and driving flows away from the risk-sensitive Kiwi. Apart from this, growing acceptance that the Federal Reserve (Fed) will keep interest rates higher for longer turns out to be another factor underpinning the Greenback and exerting downward pressure on the NZD/USD pair.

The upbeat US Retail Sales figures released on Tuesday suggested that the economy ended the third quarter on a strong note and lifted Q3 GDP estimates. The data also pushed up fears of sticky inflation, which could allow the Federal Reserve to stick to its hawkish stance and keep interest rates higher for longer. This, in turn, leads to an extended selloff in the US fixed-income market and continues to push the US Treasury bond yields higher. In fact, the yield on the benchmark 10-year government bond jumps to a fresh 16-year peak and moves close to the 5% threshold.

The current market pricing, however, points to a greater chance that the US central bank could hold interest rates steady for the second straight time in November. This, in turn, is holding back the USD bulls from placing aggressive bets, though does little to lend any support to the NZD/USD pair. Traders now look to the US macro data – Weekly Initial Jobless Claims, the Philly Fed Manufacturing Index and Existing Home Sales data – for a fresh impetus. The focus, however, will remain glued to Fed Chair Jerome Powell's scheduled speech later during the US session.

Technical levels to watch