NZD/USD has dipped below 0.5800 as the market becomes cautious ahead of important US data releases. The US ADP employment report and Nonfarm Payrolls will likely impact the US Dollar’s direction in the near term. The Kiwi Dollar rose from 0.5740 on Monday but couldn’t maintain its position above 0.5800 during Tuesday’s European session, falling to around 0.5790 as the US session began. The positive market sentiment from earlier faded during the London session, leading to less selling pressure on the US Dollar and shifting focus to key US labor data.

US Dollar Weakens as Key Data Approaches

The US Dollar weakened on Monday after the ISM Manufacturing PMI dropped to 47.9 in December, marking a 14-month low. Moreover, Neel Kashkari from the Minneapolis Fed shared a dovish outlook regarding potential interest rate cuts, affecting how the market views future Fed actions. New Zealand’s GDP figures for Q3 were better than expected, reinforcing beliefs that the Reserve Bank of New Zealand (RBNZ) completed its easing cycle last year. Governor Ann Breman indicated that a steady monetary policy is likely to continue. The New Zealand Dollar is influenced by its economy, RBNZ policies, trade ties with China, and dairy prices. It tends to strengthen with positive economic data and during risk-on periods but can weaken in times of market uncertainty. Currently, the Kiwi Dollar is stalling at the 0.5800 level as the market braces for key US employment data. The upcoming Nonfarm Payrolls report is crucial, as it may set the tone for the US Dollar in the coming weeks. With December 2025 adding a solid 215,000 jobs, significantly more than expected, we are wary of another surprising result that could boost the dollar.

Market Strategies Around US Employment Data

With this important report on the horizon, buying volatility seems like a smart strategy for the near future. This might involve options such as a long straddle on the NZD/USD, which aims to profit from a big price movement in either direction after the data release. This strategy allows us to benefit from expected market jumps without needing to guess the direction. For those who expect a weaker US Dollar, the differences in central bank policies are crucial. The RBNZ appears committed to maintaining its steady policy, while Federal Reserve officials are discussing potential rate cuts, giving the Kiwi an advantage. We could act on this view by purchasing short-term NZD/USD call options with a strike price just above the 0.5850 resistance level. On the other hand, the return of cautious sentiment in the markets favors the US Dollar as a safe haven. The VIX, a key indicator of market fear, has risen from its lows in 2025 around 13 to over 16, indicating increased concern among investors. Buying put options below the recent support at 0.5740 could allow us to profit if strong US jobs data leads to a significant dollar rally. We also need to stay alert to news from China, as its economy significantly affects the New Zealand Dollar. Manufacturing PMI data from late 2025 showed only a slight expansion at 50.7, which is not the robust recovery we had hoped for. Any further signs of weakness from China in the upcoming weeks could limit the Kiwi’s upward potential, even if US data disappoints. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now