NZD/USD falls further below the 0.5800 level and approaches the weekly low amid USD strength

The NZD/USD pair attracts sellers at the 0.5835-0.5840 region on Thursday and falls for a second consecutive session. Spot prices fall below the 0.5800 level during the opening minutes of the European session and appear prepared to prolong the overnight post-FOMC strong drop from the highest level since September 20.

In the previous hour, the US dollar reversed an intraday decline and climbed to a one-and-a-half-week high, which is considered as a main factor placing negative pressure on the NZD/USD pair. Wednesday, the US central bank hinted at a possible future policy shift, but Fed Chair Jerome Powell crushed hopes for a dovish swing. Powell stated that it was premature to consider a pause in the rate-hiking cycle and that the final rate would be higher than anticipated.

The hawkish comments of Powell signal that the Fed will continue to raise interest rates to battle inflation. This is bolstered by a recent increase in US Treasury bond yields, which continues to support the dollar. In addition, a lower risk tone provides added support for the safe-haven dollar and weighs on the risk-averse kiwi. Concerns about economic headwinds emanating from rapidly rising borrowing costs and China's zero-COVID policy keep market mood weak.

The fundamental environment appears heavily weighted in favor of USD bulls, suggesting that the path of least resistance for the NZD/USD pair is down. Some follow-through selling below the weekly low, under 0.5775, will reaffirm the bearish outlook and pave the way for an additional near-term depreciation. Ahead of Friday's NFP announcement, market observers anticipate the US ISM Services PMI to provide some impetus during the early North American session.