• NZD/USD drifts lower for the third straight day and moves back closer to the YTD low.
• The USD remains well supported by a combination of factors and exerts some pressure.
• Recession fears, geopolitical risks, US-China trade jitters weigh on the risk-sensitive kiwi.

The NZD/USD pair attracts fresh selling following an early uptick to the 0.5630 region and turns lower for the third successive day on Monday. The pair remains depressed below the 0.5600 mark heading into the North American session and moves well within the striking distance of the YTD low set in September.

A combination of factors assists the US dollar to scale higher for the fourth straight day, which, in turn, is seen exerting downward pressure on the NZD/USD pair. The prospects for a more aggressive policy tightening by the Federal Reserve, a further escalation in the Russia-Ukraine conflict and fresh US-China trade jitters act as a tailwind for the safe-haven buck.

The robust US monthly jobs report released on Friday pointed to the resilient economy and gives the US central bank enough space to keep hiking rates at a faster pace to combat stubbornly high inflation. In fact, the markets are currently pricing in a greater chance of the fourth consecutive supersized 75 bps rate increase at the next FOMC policy meeting in November.

On the geopolitical front, Russia launched a barrage of missile attacks in Ukrainian cities, including the capital Kyiv, in response to the attack on the Kerch Strait bridge over the weekend. Furthermore, the White House announced export controls to cut China off from certain semiconductor chips, raising concerns about the worsening trade ties between the world's two largest economies.

The latest developments further fuel worries about a deeper economic downturn and continue to weigh on investors' sentiment. This is evident from a generally weaker tone around the equity markets, which tends to drive haven flows towards the greenback and further undermines the risk-sensitive kiwi. This, in turn, supports prospects for a further depreciating move for the NZD/USD pair.

That said, RSI (14) on the daily chart remains on the verge of breaking into oversold territory and warrants some caution for aggressive bearish traders amid relatively thin trading volumes. Investors might also prefer to move to the sidelines ahead of this week's release of the FOMC minutes on Wednesday and the latest US consumer inflation figures on Thursday.

Technical levels to watch