NZD/USD tumbles on Wednesday, losing 1.00% on the day to trade around 0.5670 at the time of writing. The pair faces strong selling pressure as the US Dollar (USD) benefits from stronger-than-expected United States (US) activity data, reinforcing expectations of further interest-rate hikes.
The S&P Global US Composite Purchasing Managers Index (PMI) rises to 58.4 in September from 56 in August, signaling a marked acceleration in private-sector activity. Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, notes that US business activity is expanding at its fastest pace in more than five years.
The details of the survey are also robust. The US Manufacturing PMI jumps to 57, well above the 53.5 expected, while the Services PMI rises to 58.7, compared with the forecast of 56. Readings well above the 50 threshold indicate an expansion in activity and help ease concerns over a slowdown in the US economy.
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The data provides strong support to the US Dollar. The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, gains 0.54% and trades around 101.10 after reaching a fresh two-month high. The strengthening of the Greenback puts direct downward pressure on NZD/USD.
The strength of US activity also reinforces expectations that the Federal Reserve (Fed) still has room to continue tightening monetary policy. The US central bank raised its policy rate by 25 basis points last week, bringing the target range to 3.75%-4%, while its latest projections point to at least one additional rate hike this year.
According to the CME FedWatch tool, markets now see around a 68% chance of another rate hike in October, up from around 55% a day earlier. The shift in monetary policy expectations also supports US Treasury yields, with the ten-year yield hovering around 5.06%.
The combination of robust economic activity, elevated Treasury yields and expectations of higher US interest rates continues to favor the US Dollar at the expense of risk-sensitive currencies, keeping NZD/USD under strong pressure.
NZD/USD technical analysis
In the one-hour chart, NZD/USD trades at 0.5671, keeping a bearish near-term tone as the pair holds beneath the 100-period simple moving average (SMA) at 0.5720 and the 200-period SMA at 0.5743. The recent slide from the 0.5718 daily open has pushed price toward intraday lows, while the Relative Strength Index (14) at 29.15 flirts with oversold territory, suggesting that while downside pressure dominates, scope for a corrective bounce cannot be ruled out.
On the topside, initial resistance emerges at 0.5695, ahead of a denser supply zone around the 100-period SMA at 0.5720 and the horizontal barrier at 0.5735, with the 200-period SMA at 0.5743 reinforcing the broader bearish cap. On the downside, immediate support is seen at 0.5670, with a break exposing the next bearish target at 0.5626, where buyers may attempt to stem the decline.