NZD/USD Price Forecast: Weakens below 0.5900, but staying supported above 100-day SMA
- NZD/USD declines to near 0.5875 in Wednesday’s early European session.
- The pair maintains a constructive outlook above the 100-day SMA, with neutral-to-positive RSI momentum.
- The first upside barrier emerges at 0.5926; the initial support level to watch is 0.5855.
The NZD/USD pair trades with mild losses around 0.5875 during the early European session on Wednesday. Escalating tensions in the Middle East boost a safe-haven currency such as the US Dollar (USD) and act as a headwind for the pair.
Iran’s Chief of Staff Major General Ali Abdollahi on Wednesday warned Persian Gulf states against providing assistance to the US military amid heightened regional tensions. "We warn any assistance and facilitation provided to the aggressor U.S. army is tantamount to participation with U.S. military forces,” Abdollahi added.
However, traders reduce their bets of the US Federal Reserve (Fed) rate hike in the September policy meeting after the release of unexpected job losses in July and tame inflation data. This, in turn, could weigh on the Greenback and cap the downside for the pair.
"Benign inflation and signs of softness in the US labour market make a September Fed hike highly unlikely at this point—despite the modest firming in Fed expectations this morning," said Scotiabank analysts led by Shaun Osborne. "Short-term USD gains remain a fade from our point of view,” Osborne added.
NZD edges above average as BNY questions pricing for further RBNZ hikes
Strategists at BNY observe that the Kiwi is trading with a modest tailwind, noting that “the NZD itself is now trading slightly above the rolling 12-month average.” However, they push back against the degree of tightening implied by current market pricing, stating that they “continue to doubt the current market pricing of interest rates expectations, where two more Reserve Bank of New Zealand (RBNZ) hikes are expected by year end.” While BNY acknowledges that “domestic activity remains robust,” they emphasise that “inflation expectations remain relatively well-anchored,” suggesting the case for additional RBNZ rate increases may be less compelling than investors currently assume.
Technical Analysis: NZD/USD maintains a mildly positive tone above the 100-day SMA
In the daily chart, NZD/USD holds a mildly bullish near-term bias as spot remains above the 100-day simple moving average (SMA) and the Bollinger Bands’ middle SMA, hinting at underlying demand on dips. The Relative Strength Index (14) around 55 keeps a neutral-to-positive tone, suggesting upside pressure is present but not stretched.
On the topside, initial resistance is defined by the August 17 high of 0.5926. The next hurdle is seen at the Bollinger upper band near 0.5940, where rallies could pause. Any follow-through buying above this level could pave the way to the 0.6000 psychologocal level.
On the downside, immediate support is seen at the Bollinger middle band around 0.5855, followed by the 100-day SMA at 0.5830. A deeper retreat would expose the lower Bollinger band near 0.5770 as a more substantial floor.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
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