• NZD/USD continues losing ground on Monday and drops to its lowest level since November.
• A modest recovery in the risk sentiment undermines the USD and lends support to the pair.
• Hawkish Fed expectations, elevated US bond yields support prospects for additional losses.

The NZD/USD pair extends Friday's breakdown momentum below the 200-day Simple Moving Average(SMA) and drops to over three-month low on the first day of a new week. The pair maintains its offered tone heading into the North American session and is currently placed just below mid-0.6100s, down nearly 0.50% for the day.

The US Dollar remains pinned near a seven-week high amid hawkish Fed expectations and turns out to be a key factor that continues to exert downward pressure on the NZD/USD pair. In fact, the markets seem convinced that the US central bank will stick to its hawkish stance in the wake of stubbornly high inflation. The bets were reaffirmed by the stronger US PCE Price Index data on Friday, which indicated that inflation isn't coming down quite as fast as hoped.

Furthermore, the incoming robust US macro data points to an economy that remains resilient despite rising borrowing costs. This should allow the Fed to continue lifting interest rates, which remains supportive of elevated US Treasury bond yields and continues to lend support to the buck. That said, a modest recovery in the equity markets undermines the Greenback's relative safe-haven status and helps limit losses for the risk-sensitive Kiwi, at least for now.

The fundamental backdrop, however, remains tilted in favour of bearish traders and suggests that the path of least resistance for the NZD/USD pair is to the downside. Moreover, Friday's sustained break and close below a technically significant 200-day SMA adds credence to the negative outlook. Traders now look to the US economic docket, featuring the release of Durable Goods Orders and Pending Home Sales data, to grab short-term opportunities around the major.

Technical levels to watch