Ella 
NZD/USD attracted some buyers around 0.5960 on Monday in Asia, filling a modest bearish gap at the weekly open, but lacked follow-through. NZD/USD is still facing resistance above last week’s fluctuation high of 0.6000. At present, NZD/USD seems to have interrupted its three consecutive rises.
Global risk sentiment took a hit from Hamas’ attack on Israel over the weekend, which was seen as providing some support to the safe-haven US dollar (USD) and providing resistance to the risk-sensitive NZD/USD. Hamas, the Palestinian armed group in the Gaza Strip, launched unprecedented attacks on Israeli towns on Saturday. In response, Israel launched airstrikes on Gaza on Sunday and declared war on the Palestinian enclave, resulting in hundreds of casualties on both sides.
However, the dollar lacked bullish momentum as market participants preferred to wait for more clues on the Federal Reserve’s path to raising interest rates in the future. The U.S. nonfarm payrolls report released last Friday showed that nonfarm payrolls added 336,000 jobs in September, higher than expected and stronger than the upwardly revised previous value of 227,000. The non-farm payrolls data reiterated the Federal Reserve’s bet that it will raise interest rates at least once before the end of the year, which still supported the rise in U.S. Treasury yields and boosted the dollar.
However, other components of the report showed wage growth remained modest in September, easing inflation concerns that could allow the Fed to soften its hawkish stance. As a result, investors are now focused on the Federal Reserve meeting minutes due on Wednesday, as well as the latest U.S. consumer inflation data on Thursday. This will drive expectations for the Fed’s next policy moves and drive demand for USD, giving NZD/USD new directional momentum.
At the same time, in the absence of relevant macro data and the Bank of America holiday, the expansion of market risk sentiment will continue to affect US dollar price dynamics. Later in early North American trading, traders will look for clues from speeches by Federal Reserve officials. In the meantime, the above fundamental backdrop makes us cautious before taking further positions on NZD/USD’s rebound from last week’s near one-month low near 0.5870.
