NZD/USD climbs sharply, eyeing the 50-DMA around 0.5880 as the US Dollar slide prolongs

• NZD/USD is rallying more than 100 pip on Fed pivot commentary.
• September’s overall US housing data weigh on the US Dollar, as shown by the US Dollar Index, down 2% in the week.
• The NZ Business confidence missed estimates, as companies’ worries about inflation persist; forecasts of an RBNZ 75 bps rate hike jumped.

The New Zealand Dollar is advancing for the second straight day vs. the buck amidst a mixed market mood, while the US Dollar free-fall continued while the NZD got a lift from Wednesday’s Australian CPI report, which underpinned the AUD. At the time of writing, the NZD/USD is trading at 0.5831, above its opening price by almost 2%.

Expectations for a Federal Reserve pivot undermine the greenback. US Treasury yields tumbled across the curve, with the 10-year benchmark note rate down seven bps, at 3.034%, headwinds for the buck. The US Dollar Index, a gauge of the greenback’s value vs. a basket of peers, drops 1.05%, sitting at 109.726.

In the week, US housing economic data remains at the center of the US economic docket. New-Home Sales for September fell by 10.9% MoM, less than a contraction of 15%, as home buyers remain scared by higher borrowing costs, with mortgage rates lifting by 7.16% due to the Fed’s aggression. The lack of Fed officials crossing newswires due to the blackout period ahead of the next week’s monetary policy decision keeps investors speculating on the outcome of the discussions regarding December’s decision.

Meanwhile, the November Federal Reserve Open Market Committee (FOMC) meeting has fully priced in an 89.3% chance for a 75 bps rate hike, lower than the previous day’s 96.2%. Concerning December’s meeting, odds for a 50 bps increased from 47.4% on Tuesday to 55.3% as investors repriced the pace of hikes.

Aside from this, during Wednesday’s Asian session, the New Zealand Business Confidence for October missed estimates, dropping to 42.7, sinking more than the previous month’s reading of -36.7. According to Westpac analysts, the low level of business confidence isn’t a surprise even though spending levels in the economy are stead, rising costs and staff shortages oppose difficult challenges to hurdle.

The survey mentioned that inflation is the focal point, and Westpac analysts foresee another 75 bps rate hike from the Reserve Bank of New Zealand (RBNZ) at the upcoming meeting in November,

Therefore, due to a possible Fed pivot, the NZD/USD might continue to edge higher unless Friday’s US PCE registers a higher reading, which could deter Fed officials from pivoting, opening the door for further NZD/USD downward pressures.

NZD/USD Key Technical Levels