NZD/USD regains upside traction to reach day highs at 0.5640

• The New Zealand dollar appreciates further nad reaches 0.5640.
• A somewhat softer USD is contributing to kiwi's recovery.
• NZD/USD likely to extend losses to 0.50 – ING.

The New Zealand dollar has picked up momentum on Tuesday’s US session after bouncing up from 0.5575, to hit day highs at 0.5640 so far. The pair appreciates beyond 1% on the daily chart to pare some of the previous three days’ losses.

The kiwi appreciates as the USD pulls back

The greenback seems to have lost steam on Tuesday after a four-day rally. The US Dollar Index is showing a moderate reversal, which is helping most of the major currencies to regain some of the recent losses.l

Investors’ mood, however, remains negative, with the major stock indexes moving into negative territory and US Treasury bonds trading higher. This keeps underpinning demand for the safe-haven dollar and hinders any relevant recovery for the NZD.

Furthermore, the market is awaiting the release of a key US inflation report, due later this week. According to most accounts, price pressures are likely to have increased oin the US, which would offer additional reasons to the Federal Reserve to approve another aggressive rate hike in November.

NZD/USD might revisit 2009 lows at 0.50 – ING

The FX analysis team at ING maintain their bearish outlook intact and see the pair likely to reach 0.50: The Reserve Bank of New Zealand hiked by another 50 bps in October and signalled more tightening is on the way. Another 50 bps increase is largely expected at the November meeting. The role of monetary policy remains secondary compared to global risk dynamics (…) NZD/USD is looking at the 0.50 2009 lows as the next key support."

Technical levels to watch