NZD/USD rebounds slightly from one-week lows, remains negative around mid-0.5800 zone

• NZD/USD falls to a one-week low following the release of weaker services PMI from China.
• Fears of a US-China trade war and a modest USD rally further contribute to the intraday decline.
• Traders await Fed Chairman Jerome Powell’s speech for a significant boost.

The NZD/USD pair attracts new sellers following the previous day’s good two-way price movement and falls to a one-week low during the Asian session on Wednesday. However, spot prices manage to bounce a few pips in the last hour and are currently trading around the mid-0.5800 zone, down more than 0.50% on the day.

A private survey released today showed China’s services sector grew less than expected in November, raising concerns about the fragile recovery of the world’s second-largest economy. In fact, China’s Caixin services PMI unexpectedly fell to 51.5 in November from 52.0 in the previous month. This comes on top of new US export restrictions on China and concerns about US President-elect Donald Trump’s looming tariffs, which in turn weigh heavily on antipodean currencies, including the Kiwi.

The US Dollar (USD), on the other hand, continues to receive support from the encouraging US data released on Tuesday, which eased fears of a significant slowdown in the labor market. Furthermore, expectations that Trump’s expansionary policies will boost inflation could force the Federal Reserve (Fed) to take a cautious stance on rate cuts. This, coupled with lingering geopolitical uncertainty, continues to support the safe-haven Dollar and puts additional downward pressure on the NZD/USD pair.

However, USD bulls seem reluctant to open aggressive positions and are opting to stay on the sidelines ahead of Fed Chair Jerome Powell’s speech later on Wednesday. In addition to this, the release of the highly anticipated US Non-Farm Payrolls (NFP) report on Friday should offer new clues on the Fed’s rate cut path. This, in turn, will play a key role in the influence of short-term USD price dynamics. However, the fundamental background suggests that the path of least resistance for the NZD/USD pair is to the downside.