The NZD/USD pair is holding steady during the Asian session, trading between 0.5780 and 0.5775. Traders are waiting for news from the Federal Open Market Committee (FOMC) meeting. Many expect the US Federal Reserve to cut interest rates by 25 basis points, and statements from Fed Chair Jerome Powell will be closely watched. The results of this meeting could influence the US Dollar and the direction of the NZD/USD pair. Recently, the USD has gained strength after rebounding from its lowest level since late October, aided by repositioning trades. At the same time, the Reserve Bank of New Zealand’s cautious policy approach supports the NZD, maintaining its stance after a 25 basis point rate cut.

Waiting for China’s Inflation Data

Traders are also looking forward to China’s latest inflation data, which could impact demand for the New Zealand Dollar. The general sentiment leans towards expecting the NZD/USD pair to rise, with any short-term drops seen as opportunities to buy. China’s Consumer Price Index (CPI) is a key measure of inflation. A higher reading would be favorable for the Renminbi. The next CPI report is set for December 10, 2025, following previous readings of 0.2% and a consensus expectation of 0.7%. Today is crucial, with the Federal Reserve likely to cut interest rates and important Chinese inflation data about to be released. Implied volatility in NZD/USD options is on the rise, indicating the market is ready for a significant shift outside the current tight range below 0.5800. Traders should be prepared for a breakout, as the pair has been stuck there for several sessions. The market has already factored in the 25 basis point rate cut from the US, following recent data that shows US inflation cooling to 2.6% and economic growth slowing down through 2025. We will be paying attention to the Fed’s new economic projections and dot plot for insights on the pace of easing in 2026. If the Fed signals a more dovish approach than expected, it could significantly pressure the US dollar.

The Importance of Chinese CPI Data

The upcoming Chinese CPI data is also vital for the New Zealand dollar, as China’s economic performance directly influences the Kiwi. The consensus is predicting an increase to 0.7% inflation year-over-year, suggesting China may be moving beyond the deflation concerns that affected it last year. If the actual number exceeds this forecast, it would greatly support the NZD. This situation contrasts with the Reserve Bank of New Zealand, which adopted a hawkish stance last month by ending its easing phase. With New Zealand’s domestic inflation at a steady 3.8% in the third quarter of 2025, the RBNZ is expected to maintain its firm rates. This growing difference between a Fed that is cutting rates and a firm RBNZ creates a solid support system for the NZD/USD pair. Given this environment, we are considering buying NZD/USD call options with strike prices above the 0.5850 mark. This strategy allows us to benefit from potential gains if the Fed is very dovish or if China’s data is strong. The risk is limited to the premium we pay for the options, which protects us from any sharp declines. For a more cautious strategy, a bull call spread could work well, such as purchasing a call option at 0.5800 and selling another at 0.5950. This approach lowers the initial expense and allows for profit on a moderate upward movement, which seems likely considering the strong resistance near the 0.6000 level faced by the pair in late 2024. Any drop after today’s events should be seen as a buying chance. Create your live VT Markets account and start trading now.

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