NZD/USD drops back below 0.6250 with eyes on US Durable Goods Orders, Jackson Hole

• NZD/USD fades bounce off monthly low amid fears of economic slowdown, Fed’s aggression.
• Tepid US data triggered DXY pullback ahead of Friday’s key Jackson Hole Speech form Fed’s Powell.
• Light calendar allows risk catalysts to keep driver’s seat, US data eyed for fresh impulse.

NZD/USD retreats towards 0.6200 during the initial Asian session on Wednesday, after bouncing off the monthly low, as the market’s fears of economic slowdown and the Fed’s aggression remain intact ahead of this week’s key data/events. Also challenging the quote could be looming concerns over China and a light calendar that allows traders to consolidate recent moves.

US Dollar Index (DXY) poked the yearly high during the initial Tuesday trading amid fears of recession and increasing hawkish Fed bets, as well as growing pessimism in China. However, downbeat US economics triggered the greenback’s much-needed correction ahead of today’s Durable Goods Orders for July, not to forget Friday’s speech from Fed Chairman Jerome Powell at the Kansas City Fed’s symposium in Jackson Hole.

That said, preliminary readings of the US S&P Global Manufacturing PMI for August eased to 51.3 versus 52.0 expected and 52.2 prior while the Services gauge plunged to 44.1 from 47.3, compared to 49.2 market forecasts. According to S&P Global, the US economy is also in trouble as the Composite PMI shrank to 45, its lowest in 27 months.

Furthermore, the US New Home Sales for July dropped to the lowest levels in six years, to 0.511M from 0.585M prior and 0.575M market forecasts. Furthermore, the US Richmond Fed Manufacturing Index for August dropped to -8.0 compared to the 0.0 previous reading.

While the downbeat data allowed the USD bulls to take a breather, the yields remained firmer and Wall Street also failed to hold initial gains by closing with mild losses.

It’s worth noting that the market’s bets on the 75 basis points (bps) of Fed rate hike in September increase gradually despite the latest downbeat US data, which in turn also keeps the US dollar buyers hopeful ahead of crucial catalysts.

Talking about recession woes, the European energy crisis is getting worse amid Nord Stream 1 maintenance and fears of more geopolitical tension between Russia and Ukraine. On the same line could be the fears that China will have to go through a recession despite all efforts. Bloomberg recently came out with an analysis portraying the domestic currency yuan’s fall as another worry for the dragon nation. “The Chinese yuan’s slump to its weakest against the dollar in almost two years adds to what is already a precarious balancing act for Beijing, which is seeking ways to prop up its struggling economy without stoking financial instability,” said the piece.

To sum up, NZD/USD bears remain hopeful despite the latest corrective bounce. However, today’s US Durable Goods Orders for July, expected 0.6% versus 2.0% prior, will be important to watch for clear directions, not to forget the risk catalysts.

Technical analysis

NZD/USD rebound failed to provide a daily closing beyond the 50-DMA, around 0.6235 by the press time, which in turn joins bearish MACD signals and downbeat RSI to direct the quote towards 61.8% Fibonacci retracement of July-August upside, near 0.6190.