Ella 
NZD/USD resumed its gains on Monday and was supported by a weaker greenback.
Optimism in the market weighed on the safe-haven dollar, favoring risk assets NZD/USD.
Bets that the Federal Reserve will keep interest rates higher for longer helped limit the dollar’s losses and put a ceiling on NZD/USD.
NZD/USD attracted fresh bids on Monday and interrupted last Friday’s decline from the 0.6015 area, the highest level since August 11. NZD/USD traded around the 0.5950-0.5955 area in the Asian market, up nearly 0.20% throughout the day, and was supported by the weak dollar.
Mixed monthly U.S. employment data on Friday, which ensured the Fed will keep interest rates unchanged at its September meeting, also failed to help the dollar extend last week’s strong gains back near the monthly swing highs seen in August . In addition, the market maintains that China will take more supportive measures to support economic growth. Optimism has boosted investor confidence and is beneficial to ANZ currencies including NZD/USD.
In fact, China’s top economic planning agency, the National Development and Reform Commission, said it would create a designated department to support China’s struggling private economy. The move followed China’s boost to local dollar liquidity last week and the loosening of some mortgage rules, which still supported the positive tone for stocks. The optimism further weighed on the safe-haven dollar, favoring the risk-sensitive NZD/USD.
However, the upside for NZD/USD appears to be limited and bullish traders need to proceed cautiously ahead of any significant gains in NZD/USD in the near term. Markets appear to believe the Fed will keep interest rates higher for longer and are still pricing in the prospect of another 25 basis point hike before the end of the year. The Fed’s hawkish outlook will continue to be a “tailwind” for the USD and will cap further gains in NZD/USD.
In the absence of any market-moving economic data and the fact that Bank of America is on holiday, the above fundamental backdrop makes it wise for investors to wait for strong follow-through buying to confirm that NZD/USD has bottomed out.
