NZD/USD slipped back to just above 0.5850 on Tuesday, after reaching 0.5880 on Monday. Trading stayed cautious due to the changing situation in the US-Iran war and higher oil prices.
On Monday, US President Donald Trump said he called off an attack on Iran, citing a peace proposal with a “very good chance” of a nuclear deal. Markets reacted carefully, while concerns grew about longer-lasting inflation effects from an energy price shock.
Oil Prices And Growth Pressure
Brent crude traded above $107.00 per barrel and WTI traded at $103.00. Higher fuel costs can raise expenses for New Zealand businesses and consumers, which can weigh on growth.
NZD/USD kept a bearish near-term tone despite a rebound from near 0.5820. On the 4-hour chart, the RSI was 36 and the MACD turned marginally positive but remained shallow.
Resistance held near 0.5880, with a descending trendline from early May near 0.5915. Another resistance level sat near 0.5935, which was a prior support area.
Support was near 0.5850, with downside levels at about 0.5820 and 0.5795. The technical section was produced with help from an AI tool.
Shift In 2026 Backdrop
We remember the cautious mood back in late 2025 when geopolitical tensions and soaring oil prices punished the Kiwi. With Brent crude trading over $107 a barrel, the NZD/USD pair was pushed down towards the 0.58 handle. That environment of high energy costs and risk aversion was a significant headwind for us.
The situation today, in May 2026, has shifted considerably, creating a different set of opportunities. Geopolitical risks have eased, and Brent crude has fallen back to a much more manageable $83 a barrel, relieving pressure on New Zealand’s economy. This fundamental shift has provided a strong tailwind for the Kiwi that was absent last year.
The key driver for us now is the divergence in central bank policy. The Reserve Bank of New Zealand is holding firm with its Official Cash Rate at a restrictive 5.50%. This is because our domestic inflation, while lower, remains sticky, with the latest quarterly figures showing a 3.8% annual rate.
Meanwhile, the outlook for the US dollar is softening as a response to their own improving inflation data. With the latest US Core PCE reading coming in at 2.9%, markets are now pricing in at least two interest rate cuts from the Federal Reserve before the end of the year. This policy differential makes holding the New Zealand dollar more attractive than the US dollar.
Given this backdrop, we see the path of least resistance for NZD/USD as being to the upside in the coming weeks. We believe buying call options is a prudent way to gain exposure to this expected strength. This strategy allows us to capitalize on potential gains while defining our maximum risk upfront.
Specifically, we are looking at call options with strike prices above the current spot rate of roughly 0.6150, targeting levels like 0.6200 and 0.6250 for June and July expiries. We should watch for any dips on the back of upcoming New Zealand employment data as potential entry points. Such pullbacks could offer more favorable pricing for these bullish positions.
