NZD/USD rises above 0.5750, reaching about 0.5755 during Friday’s session in Europe. Strong US economic data has pushed back expectations for a Federal Reserve rate cut, while predictions indicate that the Reserve Bank of New Zealand (RBNZ) will keep its interest rate steady through 2026. The pair finds early support close to 0.5755 on Friday. However, further increases may be limited by positive US economic signals, which delay any anticipated cuts in interest rates by the Fed.

Strong US Economic Indicators

Initial unemployment claims in the US fell by 9,000 to 198,000 for the week ending January 10. This was better than the expected 215,000 and down from a revised 207,000. Such data strengthens the US dollar, suggesting the Federal Reserve may keep interest rates higher for longer. US President Donald Trump’s comments about Fed Chair Jerome Powell could influence market views, possibly aiding the NZD/USD pair. The RBNZ has also suggested it may stop its current easing cycle, with predictions showing the Official Cash Rate will remain the same until 2026. The value of the Kiwi is affected by New Zealand’s economic health, the policies of its central bank, and global risk sentiment. New Zealand’s main export, dairy, and its relationship with China, a key trading partner, also play a role. Risk appetite in global markets affects how investors approach the NZD. Currently, the NZD/USD is influenced by a strong US dollar and a solid RBNZ policy stance. Similar conditions led to choppy trading throughout 2025, indicating that a major breakout is unlikely soon. This suggests a strategy focused on the pair staying within a narrow range.

Economic Forces and Trading Strategy

We should keep an eye on the ongoing strength of the US economy, which is delaying any Federal Reserve rate cuts. In late 2025, the US saw solid job growth, with Non-Farm Payrolls adding over 200,000 jobs, while core inflation hovered around 3.8%. This strengthens the view that the Fed will maintain interest rates, supporting the dollar and limiting gains for NZD/USD. Conversely, the RBNZ has little incentive to soften its policy, providing ongoing support for the Kiwi. New Zealand’s inflation was 4.7% in the final quarter of 2025, well above the central bank’s target, making rate cuts unfeasible. Rising global dairy prices in recent months also support the RBNZ’s higher rate stance. Given these competing forces, selling volatility may be a smart strategy for derivative traders. Strategies like selling strangles or iron condors could be beneficial, as they profit from the NZD/USD remaining within a predictable range. This allows traders to earn from time decay as long as the pair doesn’t experience sharp movements. Additionally, we need to be aware of mixed signals from China, New Zealand’s largest trading partner. Recent purchasing managers’ index (PMI) data showed weakness in manufacturing, which might limit demand for New Zealand’s exports. This external risk reinforces the idea of a stable trading range rather than a strong upward trend. Create your live VT Markets account and start trading now.

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