NZD/USD slides below 0.5800 on weak Chinese PMI, focus remains on FOMC decision

• NZD/USD drifts lower for the second straight day and is pressured by a combination of factors.
• The dismal New Zealand jobs data and China’s Caixin manufacturing PMI weigh on the Kiwi.
• Hawkish Fed expectations and elevated US bond yields continue to underpin the Greenback.
• The USD bulls now look to the US macro data for some impetus ahead of the FOMC decision.

The NZD/USD pair remains under some selling pressure for the second straight day on Wednesday and slips below the 0.5800 mark during the Asian session, hitting a fresh weekly low in reaction to the disappointing Chinese data.

A Caixin-sponsored survey showed that business activity in China’s manufacturing sector contracted in October for the first time in three months. In fact, the Caixin China PMI fell from 50.6 the previous month to 49.5 in October, confirming the official figures released on Tuesday and fueling concerns about the worsening conditions in the world's second-largest economy. This comes on top of dismal domestic employment figures and exerts additional downward pressure on the New Zealand Dollar (NZD).

Statistics New Zealand reported that the number of employed people unexpectedly fell by 0.2% during the third quarter and the jobless rate rose to 3.9% from 3.6%. This, in turn, suggests that the Reserve Bank of New Zealand (RBNZ) will keep its policy rate unchanged in November, which, along with a modest US Dollar (USD) strength, drags the NZD/USD pair lower. The USD bulls, however, seem reluctant to place aggressive bets and now look to the highly-anticipated FOMC monetary policy decision.

The Federal Reserve (Fed) is widely expected to maintain the status quo for the second time in a row. Investors, however, seem convinced that the US central bank will keep the door open for additional rate hikes to bring inflation back to the 2% target. Moreover, the US economic resilience should allow the Fed to stick to its hawkish stance. Hence, the accompanying policy statement and Fed Chair Jerome Powell's comments at the post-meeting presser will be scrutinized for cues about the future rate-hike path.

The outlook, in turn, will play a key role in influencing the near-term USD price dynamics and help determine the next leg of a directional move for the NZD/USD pair. Heading into the key event risk, traders will confront the release of US macro data – the ADP report on private-sector employment, the ISM Manufacturing PMI and JOLTS Job Openings data – later during the early North American session. In the meantime, elevated US Treasury bond yields might continue to underpin the buck and weigh on the major.

Technical levels to watch