The NZDUSD pair dropped after the FOMC decision and a disappointing New Zealand GDP report. Market expectations for a 50 basis point cut from the RBNZ have risen, but upcoming US data is likely to affect the pair further. Initially, the USD weakened after the Fed’s decision but then regained strength as traders realized the Fed might keep rates higher than expected. The FOMC’s dot plot suggested there could be two rate cuts in 2025, which was not what the market anticipated.

Powell’s Rate Cut Strategy

Fed Chair Powell labeled the rate cut as “risk management” due to weak job reports. However, robust US jobless claims data later supported the USD. Future data releases are expected to further influence interest rate expectations and the USD’s direction. The RBNZ adopted a dovish stance in its last meeting, hinting at a potential 50 basis point cut. The unexpected weakness in New Zealand’s GDP data led to rising expectations for this cut, which caused the NZD to drop as the market adjusted to these higher odds. From a technical perspective, NZDUSD reached the 0.5850 support level on the daily chart. Buyers see a chance for a rise to 0.6050, while sellers aim for a decline to 0.57. The 1-hour chart shows a tight range between 0.5863 and 0.5843, with potential breakouts that could shape future price movements. Key events to watch include the US Flash PMIs, Fed Chair Powell’s speech, US Jobless Claims, and the US PCE report. Additionally, comments from Fed members may also impact the market this week.

Nzdusd Reacts To Us And Nz Economic Shifts

NZDUSD sharply declined after the Federal Reserve’s recent meeting and a surprisingly weak GDP report from New Zealand. The Q2 2025 data confirmed a technical recession with a -0.2% contraction, which led the markets to factor in a 65% chance of a 50 basis point cut from the RBNZ next month. However, the focus is shifting back to upcoming US economic data. The updated dot plot from the Fed’s meeting last week revealed that the central bank is cautious about further rate cuts, surprising many traders. While job growth slowed in July and August 2025, last week’s initial jobless claims were strong at 212,000. The recent core PCE inflation reading was steady at 3.1%, making this week’s PCE report crucial for determining if price pressures are easing. Conversely, the Reserve Bank of New Zealand appears ready to ease policy more aggressively to address the recession. The market now views the upcoming RBNZ meeting as pivotal for a possible 50-point cut. This growing gap between a cautious Fed and a dovish RBNZ reminds us of similar situations in past cycles, such as 2014-2016, which led to ongoing weakness in the NZD. For derivative traders, the 0.5850 level is now a key focus, serving as a significant support area. Buying short-dated put options with a strike price near 0.5800 could be a strategy to prepare for a decline driven by strong US data this week. This offers a low-risk way to target a move toward the 0.5700 level. On the other hand, if this week’s US PCE and PMI data is surprisingly weak, the dollar might weaken, lifting the pair from support. In that case, call options with a strike around 0.5950 could provide leverage for a relief rally back toward the 0.6050 resistance area. Monitoring implied volatility surrounding these key data releases will be essential for timing your entry. Create your live VT Markets account and start trading now.

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