The Technical Rejection

The technical rejection from the 200-day Simple Moving Average is a warning for bullish traders. Comments from Fed Chair Jerome Powell may influence the USD’s direction. The table shows that the USD was strongest against the Swiss Franc, while the EUR, GBP, and JPY had varied changes. However, the USD weakened against the AUD, CAD, and NZD. Future performance will depend on new developments and the lack of major US economic data due to the government shutdown. Today, the NZD/USD pair is trying to recover toward 0.5800, driven by a weak US Dollar. This pattern is similar to previous situations where risk sentiment improved, but we need to determine if the economic fundamentals support a lasting rise. The main question is whether this is just a temporary bounce or the start of a new trend. The Reserve Bank of New Zealand’s cautious approach continues to weigh on the Kiwi dollar. Their unexpected 50 basis point cut is a past event, but its effects linger into 2025, especially as inflation approaches its target after the big hikes of 2022-2023. New Zealand’s latest quarterly GDP report shows a 0.2% contraction, leading markets to expect RBNZ rate cuts early next year, which may limit the NZD’s strength. On the flip side, the likelihood of Federal Reserve rate cuts is increasing, contributing to the current USD pullback. US inflation has cooled significantly, with September 2025’s CPI at 2.8%. Job growth is also slowing down, similar to past cycles when fears of a US government shutdown or economic slowdown temporarily weakened the dollar.

Considering Options for NZD/USD

With the weak NZD outlook and temporary USD softness clashing, we should think about using options to express a bearish view with controlled risk. Buying NZD/USD put options that expire in the coming weeks allows us to profit if the pair drops back toward recent lows below 0.5750. This strategy is smart because it limits our loss to the premium paid while offering good potential gains if the pair’s rally stumbles. From a technical perspective, keeping an eye on the 200-day moving average, currently around 0.5950, is essential as it acts as a key resistance level. We saw this average cap rallies multiple times in 2023. Any approach to this level in the next few weeks should be seen as a potential selling opportunity. Therefore, we can use this rally to take bearish positions, like put spreads, anticipating the longer-term downtrend will continue. Create your live VT Markets account and start trading now.

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