NZD/USD, capped at 0.5870, consolidates losses around 0.5800

• The kiwi extends losses after failure at 0.5870.
• The US dollar picks up amid a cautious market mood.
• NZD/USD expected to depreciate further over the coming weeks – Credit Suisse.

The New Zealand dollar is heading south for the second consecutive day on Friday, after having failed to break resistance at 0.5870 earlier today. The pair dives 0.5% on the day, although it remains on track to close a two-week recovery from the 2, ½ year low at 0.5510.

The kiwi loses steam as risk appetite fades

The positive price action witnessed in the first half of the week, lost traction on Thursday with the pair unable to find acceptance above 0.5870 as risk appetite ebbed and the US dollar started to regain lost ground.

US dollar bulls, however, have remained subdued with the investors on a cautious mood ahead of next week’s Fed monetary policy meeting. The market has priced in a 0.75% hike on Wednesday, although the odds for a shorter hike in December have increased substantially over the last few days, which is holding back US dollar longs.

Regarding the macroeconomic data, a set of US indicators has failed to provide a clear direction for the US dollar. US personal spending beat expectations, confirming that consumption, one of the main contributors to US GDP, has remained resilient in spite of the soaring inflation levels.

On the other hand, private wage growth has slowed down in the third quarter, suggesting that inflation might be nearing its peak, which would be consistent with the idea of the Federal Reserve softening its rate hike path.

NZD/USD expected to trend lower in the near term – HSBC

In a bigger picture, FX analysts at HSBC are expecting the pair to extend losses over the coming weeks: “NZD/USD is expected to go lower in the coming weeks on risk aversion (…) With a series of positive spending, migration, and inflation data in New Zealand, the market is not seeing hard-landing risks as pronounced as before. That said, the market is currently priced for an additional increase of 200 bps in policy rate by mid-2023, so damage to the economy may emerge over time.”

Technical levels to watch