NZD/USD falls further below the 0.5800 level and nears the weekly low in response to USD strength

The 0.5835-0.5840 range attracts sellers on Thursday, as the NZD/USD pair declines for a second consecutive session. During the opening minutes of the European day, spot prices fall below the 0.5800 mark and appear poised to extend the overnight post-FOMC decline from the highest level since September 20.

In the preceding hour, the US dollar reversed an intraday fall and soared to a one-and-a-half-week high, which is regarded as the principal factor exerting downward pressure on the NZD/USD pair. Wednesday, the US central bank hinted at a future policy shift, but Fed Chair Jerome Powell dashed dovish hopes. Powell remarked that it was premature to consider a stop in the rate-hiking cycle and that the final rate will exceed expectations.

Powell's hawkish remarks indicate that the Fed will continue to raise interest rates to combat inflation. Recent increases in US Treasury bond yields continue to strengthen the dollar. Moreover, a reduced risk tone gives additional support for the safe-haven dollar and weighs on the risk-averse New Zealand dollar. Concerns about economic headwinds stemming from quickly rising borrowing prices and China's zero-COVID policy have a depressing effect on the market sentiment.

The underlying environment appears to overwhelmingly favor USD bulls, suggesting that the path of least resistance for the NZD/USD pair is down. Some selling below the weekly low, below 0.5775, will underline the negative outlook and pave the way for fresh near-term decline. Ahead of Friday's NFP report, market experts predict that the US ISM Services PMI will give early North American session impetus.