The NZD/USD pair saw some ups and downs due to changes in the US dollar, influenced by Fed Chair Powell’s soft comments. There is an 85% chance of a rate cut in September, and traders expect 54 basis points of easing by the end of the year. The US Non-Farm Payroll (NFP) report next week could greatly impact interest rate expectations. Strong data may decrease the likelihood of cuts, while weak data could increase chances for a third cut by year-end. On New Zealand’s side, the Reserve Bank of New Zealand (RBNZ) predicts two more cuts after their recent dovish rate cut. The minutes revealed a discussion about a 50 basis point cut, which gained support from two members. Initially, the NZD fell but later rebounded due to Powell’s comments. Technical analysis shows the NZD/USD pair is near a key zone around 0.5850, where sellers might sell off and buyers may look for a breakthrough towards 0.5970.

Potential Upside Trends

In the 4-hour and 1-hour charts, the trends indicate potential upward movement, but there is a risk of a false breakout. Buyers are likely targeting higher prices, while sellers are watching for a drop below the 0.5850 level. Important upcoming economic data includes the US Consumer Confidence report, Jobless Claims figures, and the PCE price index. We are closely monitoring the NZD/USD pair around the 0.5850 level, which was reached following Powell’s dovish comments last Friday. This rally helped the kiwi recover losses from the recent dovish rate cut by the RBNZ. The market now sees an 85% chance of a US rate cut in September. This shift from the Fed was expected after the July NFP report came in lower than anticipated at 155,000 jobs. Additionally, recent CPI data from early August 2025 showed inflation easing to 2.9%. This week’s PCE inflation report on Friday is now crucial. A weak number could strongly support the case for a rate cut in September.

Strategies For Traders

From our perspective, the RBNZ’s dovish stance is backed by New Zealand’s slow Q2 GDP growth of only 0.2% and faster-than-expected cooling of inflation. This creates a tricky situation where both central banks seem inclined to ease policies. Essentially, it’s about which currency will weaken faster. Given the uncertainty around the 0.5850 level and significant US data this week, we notice implied volatility increasing. Derivative traders might consider strategies that profit from major price movements, regardless of direction. Buying a strangle, which involves out-of-the-money puts and calls, could be a cost-effective way to prepare for a breakout after the PCE data. For those with a specific direction in mind, the current setup offers clear levels for option strategies. Traders might buy put options with a strike price below 0.5800 to bet on a price rejection from this zone, providing defined risk. On the other hand, a clear break above 0.5850 could lead to buying call options targeting the 0.5970 trendline. Create your live VT Markets account and start trading now.

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