NZD/USD finds some support near 0.5600 mark, seems vulnerable amid bullish USD

• NZD/USD descends to a multi-day low amid the upbeat NFP-inspired modest USD strength.
• The US economy added 263K jobs in September and the unemployment rate falls to 3.5%.
• The data reaffirms Fed rate hike bets and favours the USD bulls amid the risk-off mood.

The NZD/USD pair comes under some selling pressure during the early North American session and drops to a four-day low following the release of the US labour market data. The pair, however, recovers a few pips and is currently trading with modest intraday losses, just below mid-0.5600s.

The US dollar hits a fresh weekly high in reaction to the upbeat US NFP report, which, in turn, exerts some downward pressure on the NZD/USD pair. The closely-watched jobs data showed that the unemployment rate unexpectedly fell to 3.5% in September from 3.7%. Furthermore, the US economy added more-than-anticipated, 263K new jobs during the reported month.

The data lifted bets for another supersized 75 bps Fed rate hike move in November, which is evident from a fresh leg up in the US Treasury bond yields. This, along with the prevalent risk-off mood, is seen underpinning the safe-haven buck and driving flows away from the risk-sensitive kiwi. The NZD/USD pair, however, find some support near the 0.5600 mark.

The lack of follow-through selling warrants some caution for bearish traders and before positioning for any further decline. That said, any meaningful recovery still seems elusive amid the prospects for a more aggressive policy tightening by the Fed. This, along with recession fears, suggests that the path of least resistance for the NZD/USD pair is to the downside.

Technical levels to watch