Recent movements in the NZD indicate that it is likely trading within a range of 0.5640 to 0.5680. FX analysts Quek Ser Leang and Peter Chia predict that the NZD might face more downward pressure, possibly weakening to 0.5600. After the NZD dropped to 0.5635, there were expectations to test 0.5620 before it steadied. However, it traded between 0.5631 and 0.5665 instead. Trading is anticipated to remain in the range of 0.5640 to 0.5680.

Current Market Analysis

The previous analysis, which noted the NZD at 0.5645, remains valid. A rise above the strong resistance level of 0.5705 would indicate stabilization following last week’s decline. The FXStreet Insights Team includes journalists who gather market observations from respected experts, including commercial notes and insights from various analysts. Given the current price movements, we expect the NZD/USD pair to consolidate within the narrow range of 0.5640 to 0.5680 for now. This creates opportunities for short-term trading, like selling near the top of this range. However, the overall downward momentum from late last week suggests that any upward movements should be approached with caution.

Trading Strategies and Outlook

The underlying weakness in the market is supported by strong fundamental factors. The Reserve Bank of New Zealand’s official cash rate is at 4.75%, while the US Federal Reserve’s rate is higher at 5.50%. This makes the US dollar more attractive. Additionally, a surprising 2.1% drop in the latest Global Dairy Trade auction adds to the bearish outlook towards the 0.5600 target. For those expecting a downward move in the coming weeks, purchasing put options with a strike price around 0.5600 could be a good strategy. This would allow traders to benefit from the potential drop while keeping their maximum risk clearly defined. Another option could be to establish bearish put spreads to reduce the initial cost of the position. It is important to watch the 0.5705 level, which now serves as strong resistance. A sustained break above this level would indicate that the recent decline has stabilized, challenging our downward bias. This pattern of a sharp drop followed by consolidation is similar to what we saw in late 2023 before another downward movement. Create your live VT Markets account and start trading now.

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