The US Dollar continues to exhibit strength, supported by hawkish Federal Reserve (Fed) interest rate expectations and retreating US bond yields, which have influenced both the gold and New Zealand Dollar (NZD) markets during the Asian session on Wednesday [1][2]. Gold (XAU/USD) remains steady below $4,200, oscillating in a range after stalling its recovery from the $4,100 neighborhood, the lowest since August 5. The downside for gold is cushioned by retreating US bond yields and a softer USD, with traders awaiting key US macro data releases, including the Personal Consumption Expenditures (PCE) Price Index, final Q2 GDP print, ISM Manufacturing PMI, and Nonfarm Payrolls (NFP) report later this week [1]. The Conference Board reported a drop in US Consumer Confidence Index to 81.9 in September, its lowest since 2014, prompting some USD profit-taking and providing a tailwind for gold [1]. Nevertheless, CME Group's FedWatch Tool indicates traders are still pricing in over a 90% chance that the Fed will raise rates [1].
Strategists at OCBC and MUFG/BTMU both highlight that the near-term market focus is on US labor data, with consensus expecting nonfarm payrolls to rise by 90,000 in September, down from 162,000 in August, and the unemployment rate to remain unchanged at 4.1% [1]. Analysts at MUFG/BTMU note that the US rate market expects almost another 100bps of Fed rate hikes in the year ahead, reinforcing support for the USD, especially given higher energy prices [2]. New York Fed President John Williams commented that there is no need for urgency after the September rate hike, but one further hike is likely this year if inflation remains entrenched [1][2].
The New Zealand Dollar (NZD/USD) is 0.11% higher at around 0.5645 against the USD, after finding support near 0.5625 following a sharp decline in recent weeks [2]. Despite the slight recovery, the outlook remains bearish as market experts anticipate prolonged USD strength due to hawkish Fed expectations [2]. Technical analysis shows NZD/USD trading below the 20-day EMA at 0.5736, with the RSI at 27 in oversold territory, suggesting strong downside momentum but approaching exhaustion [2]. Initial resistance is at the 20-day EMA, and as long as NZD/USD remains below this level, further weakness is favored [2].
China’s RatingDog Manufacturing PMI for September came in stronger-than-expected at 52.1, above estimates of 51.6 and the previous reading of 51.5. Theoretically, this positive data should support the NZD due to New Zealand's reliance on exports to China, but the broader technical and fundamental picture remains bearish for the Kiwi [2].
CONCLUSION
The US Dollar's strength, driven by expectations of further Fed rate hikes and higher energy prices, continues to weigh on both gold and the New Zealand Dollar. While gold finds some support from softer USD and lower bond yields, and NZD/USD sees a slight bounce on positive Chinese PMI data, the overall outlook for both assets remains cautious and bearish as markets await key US economic releases and Fed policy signals.