NZD/USD dives to 0.6200 neighbourhood, fresh monthly low amid stronger USD/risk-off

• NZD/USD continues losing ground for the fifth straight day and drops closer to the monthly low.
• Hawkish Fed expectations, rising US bond yields underpin the USD and exert pressure on the pair.
• Recession fears also benefit the safe-haven buck and drive flows away from the risk-sensitive kiwi.

The NZD/USD pair remains under heavy selling pressure for the fifth successive day on Friday and drops to a fresh monthly low during the first half of the European session. The pair has now retreated over 250 pips from a two-month high touched last week and is currently placed just above the 0.6200 round-figure mark.

The US dollar buying remains unabated on the last day of the week and turns out to be a key factor that continues to exert downward pressure on the NZD/USD pair. In fact, the USD Index (DXY), which tracks the greenback against a basket of six other currencies, climbs to a one-month high amid expectations that the Fed would stick to its policy tightening path.

The bets were reaffirmed by the recent hawkish comments by Fed officials and the incoming positive US macroeconomic releases. This, in turn, remains supportive of a further rise in the US Treasury bond yields. Apart from this, the risk-off impulse - amid growing recession fears, is underpinning the safe-haven buck and driving flows away from the risk-sensitive kiwi.

The combination of the aforementioned factors offset the Reserve Bank of New Zealand's fourth 50 bps rate hike on Wednesday and the outlook to bring forward the timing of further rate increases. Even hawkish remarks by RBBZ Governor Adrian Orr fail to impress bulls or ease the bearish pressure, suggesting that the path of least resistance for the NZD/USD pair is to the downside.

There isn't any major market-moving economic data due for release from the US on Friday, leaving the USD at the mercy of the US bond yields. Apart from this, the broader risk sentiment would be looked upon to grab short-term opportunities around the NZD/USD pair. Nevertheless, spot prices remain on track to register heavy weekly losses and seem vulnerable to decline further.

Technical levels to watch