Ella 
NZD/USD faces renewed selling pressure on Tuesday, weighed down by a variety of factors.
Bets on another Fed rate hike lifted the greenback to multi-week highs and weighed on NZD/USD.
China’s economic woes weighed on market sentiment, further weakening the risk-sensitive NZD.
Traders are now looking for some impetus from U.S. macro data ahead of Wednesday’s New Zealand jobs data.
NZD/USD came under selling pressure again on Tuesday and reversed most of the previous day’s gains. The intraday decline remained uninterrupted in the early European session and dragged NZD/USD to a new intraday low in the last hour, around $0.6150.
The prospect of further policy tightening by the Federal Reserve (Fed) pushed the U.S. dollar (USD) to its highest level since July 10, which in turn was seen as a key factor weighing on NZD/USD. It is worth recalling that Fed Chairman Jerome Powell said last week that the economy still needs to slow and the labor market remains weak for inflation to return to its 2% target. In addition, an upbeat US GDP report showed the economy was extremely resilient, opening the door to a 25bp hike in September or November.
On top of that, China’s economic woes have also prompted flows to counter-cyclical currencies, including the New Zealand dollar. Investors remained concerned that the world’s second-largest economy’s post-crisis recovery was losing steam, and new weak Chinese data added to the concerns. Indeed, a private survey, in line with the official manufacturing PMI, showed business activity in China’s manufacturing sector contracting again, with the Caixin/S&P Global Manufacturing PMI falling to 49.2 in July.
This, in turn, has dampened investors’ appetite for risk assets, as evidenced by a broadly weaker tone in U.S. stock futures, and put additional pressure on the risk-sensitive New Zealand dollar. With the recent decline, the NZD/USD pair is now trading near a one-month low near 0.6120 hit last Thursday. The above-mentioned area should now be a pivotal level that, if broken decisively, would serve as a new trigger for bearish traders and pave the way for further depreciation in NZD/USD in the near term.
Market participants now look forward to the U.S. economic calendar, which includes the release of the ISM manufacturing PMI and JOLTS job vacancies data. These data, along with broader risk sentiment, will influence USD price dynamics and provide some impetus to NZD/USD. The market focus will then turn to New Zealand’s quarterly employment data due to be released during the Asian session on Wednesday. Even a slight disappointment was enough to deal a heavy blow to the national currency and set the stage for a bigger decline.
