NZD/USD Price Analysis: Corrects from 0.6000 as Middle East tensions triggers risk-off mood

• NZD/USD juggles around 0.5980 after a corrective move, propelled by a risk-off impulse.
• The US Dollar Index recovers to near 106.53 as investors shift focus to the inflation data for September.
• NZD/USD trades in a 0.5840-0.6050 range from the past two months, indicating a sheer volatility squeeze.

The NZD/USD pair turns sideways below the psychological resistance of 0.6000 as tensions deepening in the Middle East over the Israel-Hamas crisis have dampened market sentiment. The Kiwi asset drops to near 0.5980 as investors rush to safe-haven assets. It is worth noting that a sell-off in the Asia-Pacific currencies is slower against selling pressure in Europe.

The appeal for the US Dollar improves significantly due to the risk-off impulse propelled by Israel-Hamas tensions and rising odds of one more interest rate increase from the Federal Reserve (Fed) prompted by strong labor demand.

The US Dollar Index (DXY) recovers to near 106.53 and is expected to extend upside as investors shift focus to the Consumer Price Index (CPI) data for September, which will be published on Thursday. The core CPI that strips off volatile food and oil prices is seen growing at a steady pace of 0.3%.

NZD/USD trades in a 0.5840-0.6050 range from the past two months, indicating a sheer volatility squeeze. A prolonged consolidation is generally followed by wider ticks and heavy volume after a volatility explosion.

The Kiwi asset remains sticky with the 20-period Exponential Moving Average (EMA) around 0.5960, portraying a sideways performance.

Meanwhile, the Relative Strength Index (RSI) (14) hovers near 60.00. A breakout above the same would activate the bullish impulse.

Going forward, a decisive break above the psychological resistance of 0.6000 would drive the major toward September 29 high around 0.6050. A breach of the latter would send the major toward August 09 high at 0.6096

On the flip side, a breakdown below the round-level support of 0.5900 would drag the major toward September 7 low at 0.5847. A slippage below the latter would expose the asset to the round-level support at 0.5800.

NZD/USD four-hour chart