NZDUSD hits fresh weekly low, slips below mid-0.5800s ahead of US CPI

• NZDUSD continues losing ground for the second straight day amid sustained USD buying.
• Retreating US bond yields, a positive risk tone does little to lend any support to the pair.
• Investors now look forward to the crucial US CPI report for a fresh directional impetus.

The NZDUSD pair remains under some selling pressure for the second straight day on Thursday and retreats further from its highest level since September 19 touched earlier this week. The pair continues losing ground through the first half of the European session and drops to a fresh daily low, below mid-0.5800s in the last hour.

The US Dollar gains strong follow-through traction and builds on the previous day's solid bounce from a multi-week low, which, in turn, is seen as a key factor dragging the NZDUSD pair lower. The stronger USD move up could be attributed to some repositioning trade in anticipation of stronger US consumer inflation figures. That said, a modest pullback in the US Treasury bond yields might keep a lid on any further gains for the greenback.

Apart from this, a generally positive tone around the equity markets could act as a headwind for the safe-haven buck and offer some support to the risk-sensitive Kiwi. Traders might also refrain from placing aggressive bets and prefer to move to the sidelines ahead of the crucial US CPI report. The data will influence the Fed's rate-hiking cycle, which, in turn, will drive the USD demand and provide a fresh impetus to the NZDUSD pair.

The headline US CPI is expected to ease to the 8% YoY rate in October from last month’s reading of 8.2%. An upside surprise will revive bets for faster interest rate hikes by the Fed and boost the US currency, setting the stage for a further near-term depreciating move for the NZDUSD pair. Even from a technical perspective, this week's rejection near the 0.6000 psychological mark favours bearish traders and adds credence to the near-term negative outlook.

Technical levels to watch