Ella 
NZD/USD entered a bearish consolidation phase on Thursday and is hovering around multi-week lows.
The risk-on NZD/USD was supported by a positive risk tone and positive Chinese services PMI.
An underlying bullish sentiment on the dollar capped gains, favoring bearish traders.
NZD/USD has been seen in a sawsaw between marginally higher/lower throughout the Asian session, consolidating its recent decline to five-week lows hit earlier this Thursday. NZD/USD is currently trading around the 0.6080-0.6075 area, with little volatility throughout the day and seems vulnerable to further losses.
A modest rebound in U.S. stock futures was a key factor in favor of the risk asset NZD/USD and provided some support for it as investors digested a Fitch downgrade of the U.S. credit rating. Meanwhile, risk appetite has actively capped the recent rally in the U.S. dollar (USD) to its highest level since July 7, coupled with a positive China Caixin services PMI, acting as a tailwind for NZD/USD. That said, growing expectations that the Federal Reserve (Fed) will stick to its hawkish stance favors dollar bulls and supports the outlook for NZD/USD to extend its three-week-old decline.
U.S. ADP Employment Change released on Wednesday showed that private sector employers added 324,000 jobs in July, well above expectations for 189,000. Coupled with the recent good macro data in the United States, it shows that the U.S. economy is extremely resilient, and the Fed should be allowed to maintain higher interest rates for a longer period of time. The Fed’s hawkish outlook still supports the rise in U.S. bond yields and suggests the dollar faces the least resistance to an upside. This therefore lends credence to the short-term bearish outlook for NZD/USD, so caution is warranted before placing bullish bets or taking a position on a significant rebound in NZD/USD.
Market participants are now looking ahead to U.S. economic data, which will include U.S. weekly jobless claims, ISM services PMI and factory orders due in early North American trade. These data, as well as US bond yields and risk sentiment, may affect the volatility of the US dollar and provide short-term trading opportunities for NZD/USD. Market focus, however, will remain on Friday’s closely watched monthly U.S. jobs data. The much-anticipated non-farm payrolls will help investors determine the outlook for NZD/USD volatility.
