NZD/USD licks its wound at 29-month low, focus on 0.5860, Fed

• NZD/USD bears take a breather after refreshing multi-day low, seesaws around key support.
• Downbeat NZ GDT Price Index, PBOC inaction joins risk-off mood to weigh on prices.
• Hawkish Fed bets drown the Kiwi pair as odds of the 1.0% rate hike recently gained attention.

NZD/USD pauses the two-day downtrend, flirting with the yearly bottom surrounding 0.5900, as sellers brace for the key Fed verdict during Wednesday’s Asian session. While the pre-Fed anxiety restricts immediate moves of the Kiwi pair, fears surrounding China and Russia join downbeat data at home to weigh on the quote.

A snap lockdown in the steel hub of Tangshan, due to China’s zero covid policy, recently challenged the NZD/USD rebound. On the same line could be the news suggesting US Senators’ demand for secondary sanctions on Russian oil. It’s worth noting that the People’s Bank of China’s (PBOC) inaction and fears of economic slowdown, as well as geopolitical tussles with the US, also drown the NZD/USD prices due to the strong trade ties between Auckland and Beijing.

That said, New Zealand’s (NZD) GDT Price Index dropped to 2.0% versus 4.9% prior. The details suggest that the Whole Milk Pwder (WMP) prices rose at a slower pace of 3.7%.

On the other hand, the nine-month downtrend in the US NAHB Housing Market Index precedes the Building Permits to 1.517M in August versus 1.61M forecast and 1.685M prior. However, Housing Starts improved to 1.575M compared to 1.445M market consensus and 1.404M previous readings.

Other than the mostly firmer US housing data, the chatters that the US Federal Reserve (Fed) may surprise markets by a 1.0% rate hike, per the latest talks from global economist Nouriel Roubini, also weighed on the risk-off mood and the NZD/USD prices.

Amid these plays, US 10-year Treasury yields rose to the highest level since February 2011, around 3.567% by the press time, whereas Wall Street closed in the red. Further, the S&P 500 Futures remains indecisive of late.

Looking forward, NZD/USD prices are likely to remain depressed but may portray the pre-Fed inaction.

Also read: Federal Reserve Preview: Forecasting 5% interest rates? Dollar to move on dot-plot, Powell's pledges

Technical analysis

A one-month-old descending trend line, around 0.5860 by the press time, restricts immediate downside of the NZD/USD pair ahead of directing bears towards the year 2020 low near 0.5470.