NZD/USD: Bear sin control, testing fresh lows in downside pursuit

• NZD/USD bulls defending downside, but the Fed could be problematic on a hawkish cut.
• NZD/USD down -0.28% as markets sit tight for the Fed.

NZD/USD  is currently trading -0.24% having suffered a drop earlier in the session from a high of 0.6619 to a low of 0.6593. The main focus is ow on the Federal Reserve today, but there has been some data from China and Australia that confirms an easing bias from both the Peoples Bank of China, (PBoC) and the Reserve Bank of Australia, (RBA). We have also had some measures of business confidence  from New Zealand that has deteriorated further in July and remains at very weak levels.  

All eyes on the Fed

There is a major focus on central banks and carry trades as volatility remains stubbornly low. Should the Fed cut with a less dovish tone than what markets have priced for the Dollar, then we could see NZD/USD hammered considering the dovish backdrop from most other central banks, including the Reserve Bank of New Zealand.    

“The persistently downbeat attitude of firms has been a feature of the domestic economy this year and today’s survey suggests firms became even more pessimistic in the last month. The fact there was a deterioration in the outlook across almost all components of the survey this month underscores the softness in today’s outturn,” analysts at Westpac explained with respect to NZ Business confidence falling further in July.

“In short there was nothing in today’s release that will dissuade the RBNZ from cutting the OCR next week. Furthermore, today’s survey supports our view that another rate cut will be required come November,” the analysts added.  

NZD/USD levels