The NZDUSD fell sharply this week after the Reserve Bank of New Zealand announced a surprising rate cut. This unexpected change in the central bank’s rate path dropped the pair below its 100-hour moving average and the 38.2% retracement of its rise from April to July. It also fell beneath the important support zone of 0.5845–0.5860, which had been strong support earlier in the week. The drop brought the weekly low close to 0.5800, with today’s lowest point at 0.5799, just below the 50% midpoint of April’s recovery at 0.5802. This level supported a rebound after Powell’s speech in Jackson Hole.

NZDUSD Rebounds

The rebound pushed NZDUSD above important levels, including the 200-day moving average at 0.5826 and the previous swing floor at 0.5845–0.5860, moving toward the 38.2% retracement at 0.5877. Staying above these levels suggests more upward movement ahead, with buyers regaining control after a rocky week. Immediate support is now restored at the swing area down to 0.58455. This week, the NZD/USD pair had a wild ride, first dropping sharply due to a surprise RBNZ rate cut and then bouncing back after the Jackson Hole speech. The pair is now above the critical 0.5845 support zone, indicating that buyers are back in action. This uncertainty can be used to our advantage with options. Looking forward, it’s important to note that the main drivers are moving in different directions. Recent data from Stats NZ showed inflation for Q2 2025 at 2.9%, which might make the RBNZ cautious about further cuts. On the other hand, the latest US jobs report for July 2025 was strong, with 215,000 new jobs, giving the Federal Reserve a reason to stick to its current path.

Market Volatility

This difference in central bank actions has raised one-month implied volatility in NZD/USD to 12.8%, much higher than the calmer levels we saw earlier this summer. This increase makes options more expensive but signals that the market expects larger moves in the weeks ahead. For traders, this means there’s premium to be gained from taking calculated risks. Since the pair has reclaimed the 0.5845 level, a cautiously bullish strategy could be to buy call options with a strike price near 0.5900. This provides a chance for further upside while clearly defining your maximum risk as the premium paid. This strategy is effective if the recent bounce has momentum. Alternatively, for those who think the pair will hold steady without a significant rally, selling put options with a strike price below the 0.5845 support floor could be a smart move. This allows us to earn a premium, profiting as long as the pair stays above that key level. We saw a similar technical situation after a sharp drop in late 2023, where holding above a reclaimed support level led to a steady climb. The key level to watch is the 0.58455 support area. As long as the NZD/USD remains above it, bullish-leaning strategies are preferred. A failure to maintain this level would suggest that the rally after Jackson Hole was short-lived. Create your live VT Markets account and start trading now.

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