The New Zealand Dollar (NZD) is likely to test the 0.5720 level, but support at 0.5690 is not expected to be hit. In the long term, the outlook for the NZD has turned negative, with 0.5690 as an important level to watch. In the short term, there has been a slight increase in buying momentum, pushing the NZD into a higher range of 0.5810 to 0.5850. However, the currency sharply dropped to 0.5795 and fell further in early Asian trading, coming close to 0.5720. Immediate resistance levels are at 0.5775 and 0.5800.

Medium Term NZD Outlook

Over the next one to three weeks, the NZD was initially expected to trade between 0.5770 and 0.5865. It fell to 0.5795 and closed at 0.5799, sliding further today. The outlook has turned negative, and 0.5690 is a key focus as long as 0.5820 holds. Due to the strong downward momentum, our view of the New Zealand dollar is now negative for the upcoming weeks. The inability to maintain levels above 0.5820 on October 7th, followed by a sharp decline, suggests that the previous range-trading phase is over. We anticipate testing the 0.5720 level. This weakness is supported by fundamental factors. New Zealand’s latest quarterly inflation data showed an increase of 2.8%, which was lower than expected. This gives the Reserve Bank of New Zealand (RBNZ) room to adopt a more dovish approach. In contrast, last week’s US Non-Farm Payrolls report revealed a strong addition of 210,000 jobs, increasing the likelihood that the Federal Reserve will keep interest rates high. The growing policy gap between the two central banks is putting pressure on the NZD/USD pair. For derivative traders, this situation favors strategies that profit from a drop in the spot price. We suggest buying put options with strike prices around 0.5750 or 0.5720 to prepare for the anticipated decrease. The immediate target is 0.5720, but keep an eye on the 0.5690 support over the next three weeks.

Risk Management and Key Levels

It’s crucial to manage risks carefully. We maintain this negative outlook as long as the pair stays below the 0.5820 resistance level. If it moves back above this point, it will indicate that the downward momentum has weakened, which could invalidate the bearish outlook. Use this level as a key reference for reassessing any short positions. Historically, the 0.5690 level is significant, serving as a support zone during fears of a global slowdown in late 2023. A strong break below this level could lead to a more significant decline. So, traders should closely monitor price action around this point for signs of a bounce or a breakdown. Adding to the pressure on the kiwi, the recent Global Dairy Trade auction showed prices falling by 3.2%, marking the fourth consecutive decline. Given that dairy is New Zealand’s largest export, declining prices indicate weakening trade conditions, contributing to bearish sentiment about the currency. This suggests that the NZD’s underperformance may continue while these commodity trends are present. Create your live VT Markets account and start trading now.

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