NZDUSD trims daily losses and returns to 0.5780

• New Zealand's dollar picks up from session lows at 0.5740, returns to the 0.5780 area.
• The kiwi has lost nearly 1% following US Fed's monetary policy decision.
• NZDUSD should break 0.5880 before further appreciation is likely – UOB.

The New Zealand dollar has trimmed losses on Thursday’s US session, bouncing up from one-week lows at 0.5740 and returning to 0.5780 so far. The par, however, is 0.6% lower on the day and has lost nearly 1% following the US Federal Reserve’s monetary policy decision.

The dollar reigns after Fed’s decision

The greenback outperformed the rest of the majors on Thursday, boosted by the hawkish comments of the Federal Reserve’s president, Jerome Powell, at the press release held after the monetary policy decision was released.

The bank met expectations with a 0.75% hike, but Powell signaled to further monetary tightening and suggested that rates might peak at levels above the market expectations. These comments surprised the markets, which had anticipated the possibility of a dovish pivot, and sent the US dollar rallying.

US macroeconomic data dented US strength earlier today, with the ISM Services PMI deteriorating to 54.4 in October from 56.7 in September, beyond the 55.5 expected.

Furthermore, preliminary data anticipated that US non-farm productivity increased by 0.3%, well below the consensus of 0.6% in the third quarter, with unit labor costs slowing down to 3.5% from 8.9% in the previous quarter.

NZD/USD should close above 0.5880 before further advance is likely – UOB

FX analysts at UOB see the pair in a consolidative mood while below 0.5880: NZD could rise, but it has to close above 0.5880 before further sustained advance is likely. NZD did not close above 0.5880 and yesterday (02 Nov), it dropped to a low of 0.5815 before extending its decline in early Asian trade. Upward pressure has subsided and we expect NZD to trade between 0.5740 and 0.5900 for the time being.”

Technical levels to watch