The New Zealand Dollar (NZD) is expected to drop, but it’s not likely to reach the important support level of 0.5690 today. Another support level exists at 0.5720. Looking ahead, the long-term outlook for the NZD is negative, with the key level to watch still at 0.5690. In the short term, the NZD was originally forecasted to stay between 0.5760 and 0.5805. However, after reaching 0.5806, it fell to 0.5735. The quick increase in downward momentum could cause further declines, though hitting the 0.5690 support today is not expected. Currently, resistance levels are at 0.5765 and 0.5780.

Negative Outlook Over Weeks

Over the next one to three weeks, the outlook for the NZD has been negative since October 8th when it was at 0.5750, focusing on the 0.5690 level. This view remains valid as long as the strong resistance at 0.5810 holds. This analysis is supported by insights from the FXStreet Insights Team and various analysts. The swift downward momentum for NZD/USD indicates more declines are likely in the coming weeks. We are shifting our view to negative, predicting that the currency pair will test the main support level at 0.5690. This bearish outlook continues as long as the price stays below the strong resistance at 0.5810. This weakness is also reflected in New Zealand’s economy. The latest inflation data for Q3 was released earlier this week, showing an annualized rate of 2.8%. This is well below the RBNZ’s target and has surprised the markets. As a result, expectations for further rate hikes from the Reserve Bank of New Zealand are cooling. Additionally, a 4% drop in global dairy prices during the most recent Global Dairy Trade auction is putting more pressure on the kiwi dollar. On the US side, the dollar is finding support from a relatively hawkish Federal Reserve. Last week’s US employment report showed the economy added 210,000 jobs in September, surpassing forecasts and indicating the Fed is unlikely to cut rates soon. This policy divergence between the Fed and the RBNZ is a key factor in our negative outlook for NZD/USD.

Options for Derivative Traders

For derivative traders, this situation favors buying NZD/USD put options. A strike price near 0.5700 with a mid-November expiration could take advantage of the expected move toward the key support level. This strategy allows for defined risk while capitalizing on anticipated downward momentum. We should use the 0.5810 level as a crucial point for risk management. A strong move above this level would invalidate our bearish perspective, suggesting that the recent drop was just a temporary correction. In such a case, bearish positions should be reevaluated or closed. Looking back, a similar situation occurred in early 2024, when weak commodity prices and a strong US dollar pushed the pair down through multiple support levels. That trend lasted nearly two months before finding a significant bottom. The current macroeconomic environment feels similar, indicating this downward trend has further potential. Create your live VT Markets account and start trading now.

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