NZD/USD drops to one-month lows, 0.6900 mark back in sight

• NZD/USD remained under some selling pressure for the second successive day on Wednesday.
• The prevalent bullish sentiment around the USD was seen as a key factor exerting pressure.
• The risk-on impulse, retreating US bond yields failed to inspire bulls or stalled the downfall.

The USD buying picked up pace during the mid-European session and dragged the NZD/USD pair to one-month lows, around the 0.6925 region in the last hour.

The pair witnessed some follow-through selling for the second successive day and extended the previous day's bearish breakdown momentum below the key 0.7000 psychological mark. This also marked the third day of a negative move in the previous four and was sponsored by a broad-based US dollar strength.

Fears of a global economic slowdown resurfaced on the back of the intensifying energy crisis in China. This, along with worries about risks from the debt crisis at China Evergrande Group, boosted the greenback's status as the global reserve currency and exerted pressure on the NZD/USD pair.

In fact, the key USD Index shot to the highest level since November 2020 and was further supported by prospects for an early policy tightening by the Fed. The Fed hinted that it will soon begin tapering taper its bond purchases and the dot plot indicated policymakers' inclination to raise rates in 2022.

The USD bulls seemed rather unaffected by the looming US debt ceiling and also shrugged off a modest pullback in the US Treasury bond yields. Even the risk-on impulse in the markets did little to dent the bullish sentiment surrounding the USD or lend any support to the perceived riskier kiwi.

Market participants now look forward to the US economic docket, featuring the only release of Pending Home Sales data for August due later during the early North American session. The focus, however, will be on Fed Chair Jerome Powell's remarks at the ECB Forum on Central Banking.

This, along with the US bond yields, will influence the USD price dynamics and provide some impetus to the NZD/USD pair. Traders might further take cues from the broader market risk sentiment to grab some short-term opportunities around the major.

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