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The New Zealand Dollar recovered some territory

The Kiwi Dollar (NZD) cut its agony and registered modest gains against the US Dollar (USD) during the North American session, as risk aversion took its toll on the financial markets. Traders bracing for US Federal Reserve (Fed) Chair Jerome Powell’s speech, pereceived his remarks as dovish, while tensions in the Middle East remain high. The NZD/USD is trading at 0.5863 after reaching a new year-to-date (YTD) low of 0.5815, gaining 0.14%. Fed Chair Jerome Powell said the committee would proceed “carefully” in setting monetary policy, as evidence of above-trend growth would warrant further monetary policy tightening. He added that the policy is restrictive and acknowledged that inflation remains too high. That spurred a U-turn in the NZD/USD, which turned positive in the day.

Powell’s words echoed some of the latest round of Federal Reserve officials adopting a more neutral stance, even though most expect rates to remain at current levels for a long time. On Wednesday, the New York Fed President said that inflation has come down but remains too high. Earlier, the US economic docket featured Initial Jobless Claims for the last week rose by 198K below forecasts of 212K, portraying a hot jobs market. At the same time, the Philadelphia Fed Manufacturing Index plunged -9, far below forecasts of -6.4, implying that economic conditions are deteriorating, reigniting fears for an economic slowdown. Recently, US Existing Home Sales plunged from 4.04M to 396M in September, a -2% MoM drop, reported the National Association of Realtors (NAR). NAR’s Chief Economist Lawrence Yun commented that limited inventory and low housing affordability “hamper home sales.”

On the New Zealand front, an absent economic docket left the Kiwi adrift to Australia’s latest employment data. Aussie’s data, although positive, failed to underpin the NZD/USD, which continued to extend its losses. Even though the latest inflation report in the New Zealand was high, a neutral posture adopted by the Reserve Bank of New Zealand (RBNZ) weighed on the NZD’s outlook. After breaking the previous cycle low, the NZD/USD reinforces its downward bias as sellers observe the November 5, 2022, swing low of 0.5740, but firstly they must reclaim the 0.58 figure. On the other hand, buyers must recover the September 3 last cycle low at 0.5959, ahead of testing the 0.59 handle. Once cleared, the 50-day moving average (DMA) would be up for grabs at around 0.5934.