NZD/USD Price Forecast: Kiwi remains under pressure at YTD lows sub-0.5600

• NZD/USD breaks below 0.5600 to hit a fresh YTD low at 0.5585.
• Risk-sensitive currencies struggle on Monday as government bonds surge, triggering concerns about another credit crisis.
• The Kiwi remaines on its back foot after having depreciatred more than 6% over the last six weeks.
  
  New Zealand Dollar consolidates near two-month lows despite a brighter market mood

The New Zealand Dollar (NZD) extends its decline as the safe-haven  US Dollar (USD) maintains its bullish tone, with investors wary of risk, amid the worsening bond market turmoil. The NZD/USD pair hit fresh year-to-date (YTD) lows at 0.5585 on Monday, after having closed a six-week losing streak last Friday.

Risk sensitive currencies, such as the New Zealand Dollar are struggling on Monday as investors sell government bonds amid concerns that the high energy prices will keep inflationary pressures on the rise for some time. This is expected to add pressure to the already strained public finances of most of the world’s major economies.

DBS Group Research, however, warns that the bonds sell off might also take a toll on the US Dollar, as long-dated Treasury yields approach pre-Global Financial Crisis highs. “Higher yields driven by Fed tightening can support the USD,” but “higher term premia driven by concerns over debt supply, fiscal sustainability, and Treasury-market credibility need not,” says the DBS Group, underscoring the risk that the current rise in long-dated US yields may prove less supportive for the Dollar than previous policy-driven episodes.

Technical Analysis. The Kiwi is at heavily oversold levels

NZD/USD trades at 0.5591 after having plunged about 400 pips since mid-August. The near-term trend is strongly bearish, but the heavily oversold levels in most timeframes advise caution. The Relative Strength Index (14) in the daily chart is at 24, a level consistent with an overstretched cycle. The Moving Average Convergence Divergence (MACD) in the same timeframe remains negative, although the narrowing red bars in the histogram suggest that bears might be starting to lose steam.

Immediate support is defined by the intra-day low area around 0.5585. Further down, the 127.8% Fibonacci retracement of the June-August rally, at 0.5530 remains a plausible target. On the topside, a recovery would first need to clear the previous YTD low around 0.5630, before exposing the area between the September 28 high, at 0.5687, and the September 22 low at 0.5695. Only a sustained break above this cluster would begin to ease the prevailing bearish pressure.

(The technical analysis of this story was written with the help of an AI tool. Know more.)