The NZD/USD has risen by 0.23%, reaching 0.5783 as the USD weakens. Resistance is set at 0.5800, with targets at the 50-day and 200-day Simple Moving Averages (SMA) at 0.5830 and 0.5858, respectively. On the downside, support levels include the 20-day SMA at 0.5760, 0.5682, and the yearly low at 0.5485. The Federal Reserve’s meeting on Wednesday is expected to influence trends, where a rate cut of 25 basis points is anticipated.

Possible Shift in Trend

A shift toward a neutral-upward trend could happen if the NZD/USD moves above the 50-day SMA of 0.5830 and the 200-day SMA of 0.5858, aiming for the 100-day SMA at 0.5907. If the bearish trend continues, initial support is at the 20-day SMA of 0.5760 and the low from October 23 at 0.5724. Further weakness may find support at October’s low of 0.5682, potentially leading to the yearly low of 0.5485. This week, the New Zealand Dollar performed well against the British Pound, showing a 0.02% rise against the USD but a 0.09% drop against the EUR. We are in a very different situation compared to last year. In late October 2024, the market anticipated a Federal Reserve rate cut, giving the Kiwi a temporary boost against a softening dollar. Today, with US inflation stubbornly at 3.5% as of September, the focus is on keeping rates high for an extended period.

US Dollar Strength and Policy Influence

The strength of the US dollar is central to the current story, backed by a surprisingly robust labor market and recent Q3 GDP data showing continued economic expansion. This contrasts sharply with 2024, when hopes for rate cuts led to dollar weakness. Consequently, any strength in the NZD/USD is seen as an opportunity to sell. The Reserve Bank of New Zealand is also maintaining a tight monetary policy to control its own inflation, last reported at 4.2%. However, its policies are being overshadowed by the Fed’s actions. The interest rate difference continues to favor holding US dollars, which limits gains in the NZD/USD pair. For derivative traders, the outlook suggests a bearish trend for the NZD/USD in the coming weeks. There is ongoing interest in buying put options with strike prices below 0.5600, aiming for a retest of yearly lows. Selling out-of-the-money call options around the 0.5800 resistance level could also be a good income-generating strategy. The critical technical level to monitor on the downside is the 0.5600 support level, which has remained strong this month. A decisive break below this would open the way toward the 2025 low near 0.5520. All eyes are on the upcoming US employment report and any signals from Fed officials. Create your live VT Markets account and start trading now.

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