NZD/USD starts the week with a slight downward trend after last week’s peak near 0.6100. During the Asian session, the pair hits a new monthly low around 0.5930, showing signs of downward pressure in a risk-averse market. Current events include the US and Israel’s military actions against Iran, specifically targeting its nuclear facilities. This rise in geopolitical tensions in the Middle East is increasing interest in safe-haven assets, benefiting the US Dollar (USD) while putting stress on the New Zealand Dollar, also known as the Kiwi.

US Fed Influence

The USD is also gaining strength from the Federal Reserve’s hawkish signals. They forecast fewer rate cuts in 2026 and 2027, while still expecting two cuts in 2025. Meanwhile, the Reserve Bank of New Zealand is likely to lower interest rates due to falling inflation and economic issues caused by US tariffs. From a technical perspective, if NZD/USD drops below the short-term trading range and the 0.6000 psychological level, it suggests a downward trend. This view is supported as the market waits for upcoming US PMIs to provide new direction. The recent downward pressure on NZD/USD indicates not only a change in overall sentiment but also a significant shift in risk due to the latest geopolitical events. With tensions in the Middle East rising after US actions targeting Iran, traders are moving their money into safer assets. The US Dollar, typically the go-to asset in uncertain times, has benefited from this trend. When risk appetite decreases, currencies linked to commodities or global growth expectations, like the New Zealand Dollar, generally decline. Additionally, expectations around US monetary policy are helping the Dollar. The Federal Reserve’s guidance suggests a waning chance of prolonged easing, leading to continued strength for the Dollar. Although there may still be a couple of rate cuts next year, longer-term signs indicate the Fed is not in a rush to ease their tightening stance. This perspective keeps rates relatively high, providing ongoing support for the Dollar.

RBNZ Perspective

On the other hand, the Reserve Bank of New Zealand (RBNZ) is on a different path. With inflation rates falling and new challenges from US trade policies, New Zealand may soon have to lower borrowing costs. The softening inflation could push policymakers to relax conditions, although this won’t happen immediately. This difference in direction is not favorable for the Kiwi. When we look at the charts, the importance of the 0.6000 level is clear. The recent breach below this threshold suggests a more sustained move downward. Hitting fresh monthly lows shows how shifted market sentiment has become. Support is not expected until closer to the 0.5900 area, where there’s historical buying interest. As for upcoming economic releases, Wednesday’s US PMI figures may create some volatility and lead to corrections if expectations aren’t met. Conversely, if the data remains strong and reaffirms a robust US economy, the Dollar could strengthen even more. Traders should keep an eye on supply chains and business orders, both of which indicate persistent inflation that the Fed will pay attention to. We anticipate continued high volatility. A tactical approach may be more effective in the near term, given the reliance on data for US monetary policy. It’s wise to set tighter stop-loss orders, especially below recent support levels, while monitoring short-term resistance near 0.5980 during any corrective rallies. In summary, without a significant easing of geopolitical risks or a major decline in upcoming US economic data, any rebound in the NZD/USD pair may be limited. Current positioning favors Dollar strength over Kiwi resilience in the immediate future. Create your live VT Markets account and start trading now.

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