New Zealand Dollar rebounds after Fed hold

• NZD/USD recovers toward the 0.5790 area after initially falling amid renewed Middle East tensions and cautious market sentiment.
• The Fed kept rates unchanged at 3.50%–3.75%, although three regional bank presidents voted for a 25-basis-point increase.
• The US Dollar fell sharply as markets stopped fully pricing a September rate hike despite the generally hawkish statement.

NZD/USD trades higher near the 0.5790 area on Wednesday, reversing its earlier decline as the US Dollar (USD) weakens sharply following the Federal Reserve’s (Fed) monetary policy announcement.

The pair initially moved lower as renewed Middle East tensions boosted demand for safe-haven assets. The escalation also pushed oil prices higher, reviving concerns that rising energy costs could keep global inflation elevated and force central banks to maintain restrictive monetary policy for longer.

However, the New Zealand Dollar (NZD) recovered after the Federal Open Market Committee (FOMC) left the federal funds rate unchanged within the 3.50%–3.75% range. The decision was approved by a divided 9–3 vote, with Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari and Dallas Fed President Lorie Logan preferring a 25-basis-point increase. The Fed’s statement was generally hawkish, noting that economic activity continues to expand at a solid pace, the unemployment rate has changed little and inflation remains elevated relative to the central bank’s 2% target. Policymakers also acknowledged that supply shocks, particularly in the energy sector, are contributing to price pressures.

Despite the hawkish language and three dissenting votes, the US Dollar fell sharply following the announcement. Markets are no longer fully pricing in a September rate increase, as the decision to remain on hold raised doubts about whether a majority of officials will support tightening at the next meeting.

Short-term technical analysis:

On the 4-hour chart, NZD/USD trades at 0.5795, holding a modestly bullish bias as it consolidates above both the 20-period Simple Moving Average (SMA) around 0.5784 and the 100-period SMA near 0.5791. This clustering of moving averages just under spot suggests a nascent base, while the Relative Strength Index (RSI) hovering slightly above 50 hints at recovering, but not overstretched, upside momentum.

On the topside, initial resistance emerges at 0.5804, with a break exposing the 0.5907 and 0.5930 caps ahead of the stronger barrier near 0.5965. On the downside, immediate support is layered at the 100-period SMA around 0.5791 and the horizontal levels at 0.5788 and 0.5778, with a deeper floor seen near 0.5768, and bulls likely to retain control while price holds above this support band.

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