• NZD/USD witnessed some follow-through selling for the second successive day on Tuesday.
• Hawkish Fed expectations push the USD back closer to the monthly top and exert pressure.
• Recession fears further benefit the safe-haven greenback and weigh on the risk-sensitive kiwi.

The NZD/USD pair adds to the previous day's heavy losses and witnesses some follow-through selling for the second successive day on Tuesday. The pair extends its descent through the early European session and drops to a four-day low, around the 0.6325 region in the last hour.

Following a brief consolidation, the US dollar regains positive traction for the third straight day and climbs back closer to the monthly peak. This turns out to be a key factor exerting downward pressure on the NZD/USD pair and supports prospects for a further near-term depreciating move.

The USD continues to draw support from expectations that the US central bank would stick to its policy tightening path, bolstered by the recent hawkish comments by several Fed officials. Apart from this, recession fears underpin the safe-haven buck and weigh on the risk-sensitive kiwi.

The disappointing Chinese economic data released on Monday added to growing market worries about a global economic downturn and tempered investors' appetite for riskier assets. This is evident from a weaker tone around the equity markets, which tends to benefit traditional safe-haven assets.

The aforementioned factors favour the USD bulls, suggesting that the path of least resistance for the NZD/USD pair is to the downside. That said, traders might refrain from placing aggressive bets ahead of this week's important release of the latest FOMC monetary policy meeting minutes.

The markets are currently pricing in a greater chance of at least a 50 bps Fed rate hike in September. Hence, the minutes would be looked upon for clues about the possibility for a 75 bps move, which would influence the USD and provide a fresh directional impetus to the NZD/USD pair.

Investors would further take cues from the US monthly Retail Sales data, also scheduled on Wednesday. In the meantime, Tuesday's US economic docket, featuring housing market and Industrial Production data, might produce some trading opportunities later during the early North American session.

Technical levels to watch