CFD Trading Rate New Zealand Dollar vs US Dollar (NZDUSD)

• NZD/USD softens to near 0.5625 in Friday’s early Asian session.
• The weaker Q3 GDP data sparked bets on aggressive RBNZ rate cuts. 
• The hawkish Fed expectations boost the USD and create a headwind for NZD/USD.

The NZD/USD pair remains under selling pressure around 0.5625 during the Asian trading hours on Friday. The deep recession in New Zealand fueled the Reserve Bank of New Zealand (RBNZ) rate cut bets, which undermine the Kiwi.

The weaker-than-expected New Zealand’s Gross Domestic Product (GDP) data for the third quarter raised the risk of further large-scale interest rate cuts from the RBNZ. The markets have priced in a 91% chance of another 50 bps RBNZ rate reduction in February. 

”It supports the Reserve Bank getting on with official cash rate cuts and getting the OCR back to a more neutral level more quickly than they were anticipating in the November monetary policy statement,” said Harbour Asset Management fixed income and currency strategist Hamish Pepper.

On the other hand, the hawkish rate cut by the Federal Reserve (Fed) on Wednesday lifts the USD and contributes to the pair’s downside. During the Press Conference, Fed Chair Jerome Powell made clear that the Fed is going to be cautious about further cuts. Later on Friday, investors will monitor the release of the US Core Personal Consumption Expenditures (PCE) Price Index data, which is expected to show an increase of 2.9% YoY in November. 

• NZD/USD falls on Thursday, settling near 0.5630 and hitting new multi-year lows.
• Pair remains well below the 20-day SMA, reinforcing the entrenched bearish trend at its lowest levels since October 2022.
• RSI stands at 26 in oversold territory, offering little hope of a reversal, while MACD histogram shows rising red bars, indicating persistent selling pressure.

The NZD/USD pair extended its downtrend on Thursday, slipping by 0.36% to approximately 0.5630, a fresh multi-year low. Efforts by the bulls to stage any meaningful recovery continue to falter, as the 20-day Simple Moving Average (SMA), hovering around 0.5890, remains a distant target and a key barrier to halting the decline.

Technical indicators underscore the dire state of affairs. The Relative Strength Index (RSI) at 26 confirms oversold conditions, yet its inability to rebound suggests persistent downward momentum. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram prints rising red bars, further cementing the bearish outlook and reducing the likelihood of a near-term turnaround.

As long as NZD/USD lingers below the 20-day SMA, the overall bias remains clearly negative. With no clear support levels nearby, the pair could face additional downside risks, keeping sellers firmly in control of the market’s direction.

NZD/USD daily chart

• NZD/USD reached to 27-month low at 0.5607 after the release of Gross Domestic Product data for the third quarter.
• New Zealand's GDP shrank by 1.0% QoQ in Q3, against the expected 0.4% contraction.
• Fed’s Summary of Economic Projections suggested only two rate cuts in 2025, down from four cuts projected in September.

NZD/USD extends its losing streak for the third successive session following weaker-than-expected New Zealand’s Gross Domestic Product (GDP) data for the third quarter. The Kiwi pair declined to 0.5607, the lowest level not seen since October 2022, currently trading around 0.5640 during the European hours on Thursday.

New Zealand's GDP contracted by 1.0% quarter-over-quarter in Q3, slightly improving from the revised 1.1% contraction in Q2 but worse than the anticipated 0.4% decline. On an annual basis, GDP shrank by 1.5% in Q3, a sharper decline compared to the previous 0.5% contraction and well below the expected 0.4% drop. This disappointing data places New Zealand in its deepest recession since the initial COVID-19 slump in 2020.

The New Zealand Dollar faces additional pressure from renewed concerns over China's economy, a critical trading partner. Weak Chinese economic data, including Retail Sales missing expectations in November, has heightened challenges for policymakers. This comes despite President Xi Jinping's recent call to boost household consumption.

The NZD/USD pair dropped over 1.5% in the previous session as the US Dollar (USD) strengthened following the Federal Reserve’s (Fed) hawkish 25 basis point (bps) rate cut at its December meeting, bringing the benchmark lending rate to a range of 4.25%-4.50%, marking a two-year low. The Summary of Economic Projections, or ‘dot-plot,’ suggested only two rate cuts in 2025, down from four cuts projected in September.

Additionally, Fed Chair Jerome Powell made clear on Wednesday that the Fed will be cautious about further cuts as inflation remains stubbornly above the central bank’s 2% target. Traders are highly expected to focus on upcoming US economic data, including weekly Initial Jobless Claims, Existing Home Sales, and the final Q3 Gross Domestic Product (GDP) Annualized reading, scheduled for release on Thursday.

• NZD/USD tumbles to near 0.5630 in Thursday’s early Asian session, down 0.43% on the day. 
• Weaker-than-expected New Zealand’s GDP data weighs on the Kiwi. 
• The Fed announced a quarter-point cut to its key interest rate at its December meeting on Wednesday.

The NZD/USD pair attracts some sellers to around 0.5630 during the early Asian session on Thursday. The weaker-than-expected New Zealand’s Gross Domestic Product (GDP) data and hawkish rate cut by the US Federal Reserve (Fed) exert some selling pressure on the pair. 

The downbeat GDP data puts New Zealand into the deepest recession since the initial Covid-related slump in 2020. Data released by Statistics New Zealand on Thursday showed that the country’s GDP shrank by 1.0% QoQ in the third quarter (Q3) compared with a 1.1% contraction (revised from -0.2%) in Q2. This reading was below the market consensus of -0.4%. On an annual basis, Q3 GDP contracted by 1.5% versus -0.5% prior, weaker than the -0.4% expected. In response to the data, the Kiwi falls to the lowest level since October 2022 against the US Dollar (USD). 

”It supports the Reserve Bank getting on with official cash rate cuts and getting the OCR back to a more neutral level more quickly than they were anticipating in the November monetary policy statement,” said Harbour Asset Management fixed income and currency strategist Hamish Pepper.

On the other hand, a more hawkish-than-expected message from the Fed provides some support to the Greenback and acts as a headwind for NZD/USD. The US central bank decided to lower its key interest rate by a quarter percentage point on Wednesday, the third consecutive rate reduction. The Fed officials indicated that it probably would only lower twice more in 2025. During the Press Conference, Fed Chair Jerome Powell said, “We can therefore be more cautious as we consider further adjustments to our policy rate.”

• NZD/USD continues to lose ground amid market caution ahead of the Fed interest rate decision.
• CME FedWatch tool suggests almost fully pricing in a quarter basis point cut on Wednesday.
• The New Zealand Dollar faces challenges amid renewed concerns about China's economy.

NZD/USD extends losses for the second successive day, trading around 0.5740 during early European hours on Wednesday. This downside of the pair could be attributed to the increased risk aversion ahead of the US Federal Reserve (Fed) due later in the North American session.

However, the US Dollar (USD) remains subdued as traders are bracing for a potential 25 basis point rate cut by the Fed at its December meeting. According to the CME FedWatch tool, markets are now almost fully pricing in a quarter basis point cut at the Fed's December meeting. Traders will also closely monitor Fed Chair Jerome Powell's press conference and Summary of Economic Projections (dot-plot) after the meeting.

The New Zealand Dollar (NZD) remains under pressure due to renewed concerns about China's economy, its key trading partner, following weak economic data. Chinese Retail Sales missed expectations in November, adding strain on policymakers after President Xi Jinping indicated a desire to boost household consumption last week.

Traders are likely to monitor the Gross Domestic Product (GDP) data due on Thursday, expected to show that New Zealand's economy contracted by 0.4% quarter-over-quarter in Q3. Meanwhile, a survey from Westpac indicated that consumer confidence rose to the reading of 97.5 in the fourth quarter, from the previous quarter’s 90.8 reading, marking the highest level in three years, although it remains below long-term averages.

• NZD/USD softens to near 0.5750 in Wednesday’s Asian session.
• The Fed is expected to announce a 25 bps rate cut on Wednesday, bringing the rates to 4.25%-4.50%.
• New Zealand’s Current Account deficit narrowed as the country imported less.

The NZD/USD pair remains on the defensive around 0.5750 during the early Asian session on Wednesday. The New Zealand Dollar (NZD) struggles to gain ground as traders await the US Federal Reserve (Fed) interest rate decision on Wednesday. 

The mixed US economic data released on Tuesday had no impact on expectations that the Fed would cut interest rates at its December meeting on Wednesday. Traders have priced in a 25 basis points (bps) interest rate cut at the December meeting but lean toward a pause in January 2025. The Press Conference and the Summary of Economic Projections, or ‘dot-plot’ will be closely watched. The cautious tone about further cuts could lift the US Dollar (USD) and act as a headwind for NZD/USD. 

The Retail Sales in the US came in better than the market expectation, rising 0.7% MoM in November versus a 0.5% increase (revised from 0.4%) prior, the US Census Bureau showed Tuesday. Meanwhile, Industrial Production contracted by 0.1% MoM in November, compared to a fall of 0.4% (revised from -0.3%) in October, missing the estimation of the 0.3% expansion. 

New Zealand’s current account deficit narrowed to $10.581B in the third quarter from $4.826B in the previous reading, according to Statistics New Zealand on Wednesday. Meanwhile, the potential Donald Trump’s tariff policies could drag the Kiwi lower, as Trump said that he will impose a 10% tariff on imports from China.

Additionally, Chinese Retail Sales missed expectations in November, adding to pressure on policymakers after President Xi Jinping signaled last week that he wanted to boost household consumption. The renewed concerns surrounding China's economy weigh on the Kiwi as China is a major trading partner for New Zealand. 

• NZD/USD declines  on Tuesday, settling near 0.5755 after Monday’s modest recovery attempt.
• Pair remains confined below the 20-day SMA, reinforcing the prevailing bearish bias.
• RSI falls sharply to 36 in negative territory, while MACD histogram prints decreasing red bars, indicating renewed selling pressure.

The NZD/USD pair gave back recent gains on Tuesday, retreating by 0.48% to 0.5755 as sellers regained control. Persistent resistance at the 20-day Simple Moving Average (SMA), located around 0.5890, continues to cap any meaningful upside attempts, keeping the broader outlook tilted to the downside.

Technical indicators confirm the return of selling pressure. The Relative Strength Index (RSI) has slipped to 36, moving deeper into negative territory and reflecting intensifying bearish momentum. Similarly, the Moving Average Convergence Divergence (MACD) histogram continues to print decreasing red bars, underscoring the lack of buying interest and fading bullish attempts.

As long as NZD/USD remains below the 20-day SMA, the path of least resistance points lower. Immediate support emerges near the 0.5750 region, with a break below this level likely paving the way toward the 0.5700 mark. Without a decisive push above the 20-day SMA, any rebound attempts are likely to remain short-lived.

NZD/USD daily chart

• NZD/USD meets with a fresh supply on Tuesday and is pressured by a combination of factors.
• The RBNZ’s dovish outlook, China’s economic woes and trade war fears undermine the Kiwi.
• Bets that the Fed will pause its easing cycle and elevated US bond yields boost benefit the USD.
• Traders look to the US Retail Sales for some impetus ahead of the Fed decision on Wednesday.

The NZD/USD pair attracts fresh sellers in the vicinity of the 0.5800 mark and extends its steady intraday descent through the first half of the European session on Tuesday. Spot prices drop to the 0.5755 area in the last hour and remain close to the lowest level since October 2022 touched on Monday.

The New Zealand Dollar (NZD) continues with its relative underperformance on the back of the Reserve Bank of New Zealand's  (RBNZ) dovish stance and bets for a more aggressive policy easing by the central bank. Apart from this, concerns about China's economic recovery and the US-China trade war turn out to be another factor undermining antipodean currencies, including the Kiwi. This, along with the emergence of some US Dollar (USD) did-buying, is seen exerting some downward pressure on the NZD/USD pair.

Investors now seem convinced that the Federal Reserve (Fed) will slow the pace of its rate-cutting cycle next year amid signs that the progress on bringing inflation to 2% has stalled. Moreover, speculations that US President-elect Donald Trump's policies may lead to an increase in government borrowing, and boost inflation, remain supportive of elevated US Treasury bond yields. This, along with geopolitical risks stemming from the worsening Russia-Ukraine war and tensions in the Middle East, benefits the safe-haven buck. 

Traders now look forward to the release of the US monthly Retail Sales figures for short-term opportunities later during the early North American session. The focus, however, will remain on the outcome of the crucial two-day FOMC meeting on Wednesday. Investors will closely scrutinize the accompanying policy statement and Fed Chair Jerome Powell's speech for cues about the future rate-cut path. This, in turn, should influence the near-term USD price dynamics and provide a fresh directional impetus to the NZD/USD pair.

• NZD/USD steadies as traders expect a 25 basis point rate cut by the US Fed on Wednesday.
• CME FedWatch tool suggests almost fully pricing in a quarter basis point cut at the Fed's December meeting.
• Traders await New Zealand’s Gross Domestic Product GDP data for Q3 due on Thursday.

NZD/USD holds ground as traders are bracing a potential interest rate cut by the US Federal Reserve (Fed) on Wednesday, with attention largely focused on the Fed's projections for 2025. The NZD/USD pair hovers around 0.5780 during Asian trading hours on Tuesday.

According to the CME FedWatch tool, markets are now almost fully pricing in a quarter basis point cut at the Fed's December meeting. Investors will closely monitor Fed Chair Jerome Powell's press conference and Summary of Economic Projections (dot-plot) after the meeting.

Additionally, the NZD/USD pair receives minor support as the US Dollar (USD) remains subdued for the third successive session amid market caution ahead of the Fed decision. The US Dollar Index (DXY), which measures the value of the US Dollar against its six major peers, trades around 106.70 at the time of writing.

On Monday, the preliminary S&P Global Composite Purchasing Managers Index (PMI) rose to 56.6 in December, from 54.9 prior. Meanwhile, the Services PMI improved to 58.5 from 56.1. The Manufacturing PMI declined to 48.3 in December, from the previous 49.7 reading.

In New Zealand, traders adopt caution as Gross Domestic Product (GDP) data for Q3 are scheduled to be released on Thursday. The economy is projected to shrink by 0.4% quarter-on-quarter, potentially falling back into recession.

China's Retail Sales, a crucial indicator for New Zealand's key trade partner, unexpectedly slowed in November, dampening sentiment in antipodean markets. Sales grew by 3.0% year-on-year, below the expected 4.6% and significantly down from October's 4.8% expansion. 

On Monday, the domestic data showed that the Business NZ Performance of Services Index climbed to 49.5 in November, up from 46.2 in October, marking its highest level since February. Additionally, the Food Price Index increased by 1.3% year-on-year in November, slightly above the 1.2% rise recorded in October.

• NZD/USD gains on Monday, settling around 0.5780 after recent declines.
• Pair remains below the 20-day SMA, limiting upside potential and keeping the bearish bias intact.
• RSI rises sharply to 39, while MACD histogram shows decreasing red bars, suggesting easing selling pressure.

The NZD/USD pair managed a modest recovery on Monday, gaining 0.29% to trade near 0.5780. Although this uptick indicates a slight reduction in selling pressure, the pair continues to trade below the 20-day Simple Moving Average (SMA), currently near 0.5850, which remains a key hurdle to overcome.

Technical indicators reflect a tentative improvement but maintain a bearish slant. The Relative Strength Index (RSI) has climbed to 39, up from near-oversold territory, suggesting fading downside momentum. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram prints decreasing red bars, signaling that bearish traction may be waning. Still, the pair’s inability to rise above its 20-day SMA keeps the overall outlook negative.

Looking ahead, a decisive break above the 20-day SMA would be required to shift sentiment and encourage buyers to engage more confidently. On the downside, immediate support emerges around the 0.5750 region, followed by the 0.5700 mark if sellers regain control.

NZD/USD daily chart

• NZD/USD moves higher to near 0.5785, while the US Dollar exhibits a subdued performance.
• The Fed is almost certain to announce a 25-bps interest rate reduction in the policy meeting on Wednesday.
• The NZ economy is expected to have declined by 0.4% in the third quarter.

The NZD/USD pair rises to near 0.5785 in Monday’s North American session after refreshing a yearly low near 0.5750 on Friday. The Kiwi pair gains as the US Dollar (USD) exhibits a subdued performance, with investors focusing on the Federal Reserve’s (Fed) interest rate decision, which will be announced on Wednesday.

Investors expect the Fed to cut interest rates by 25 basis points (bps) to 4.25%- 4.50%. Market participants will focus primarily on Fed Chair Jerome Powell’s commentary in the press conference after the policy decision to gauge the impact of President-elect Donald Trump’s policies on the interest rate outlook.

According to analysts at Macquarie, the Fed’s stance on the interest rate outlook could turn “slightly hawkish” from “dovish.” “The recent slowdown in the pace of US disinflation, a lower Unemployment Rate than what the Fed projected in September, and exuberance in US financial markets are contributing to this more hawkish stance,” analysts at Macquarie said.

Meanwhile, the New Zealand Dollar (NZD) will be guided by the Q3 Gross Domestic Product (GDP) data, which will be published on Thursday. The New Zealand (NZ) economy is estimated to have contracted by 0.4% compared to the same quarter of the previous year, slower than the 0.5% decline in the previous quarter.

The NZD/USD daily chart shows a Bullish Divergence, which suggests a slowdown in selling momentum that results in a reversal move. While the asset has formed a lower low on a daily timeframe, the 14-day Relative Strength Index (RSI) has made higher lows. The formation needs confirmation to set off a bullish reversal.

A decisive break above the November 29 high of 0.5930 could confirm a reversal setup and push it higher to the November 15 high of 0.5970 and the psychological resistance of 0.6000.

However, the chances of a bullish divergence confirmation are weak due to unsupportive NZ fundamentals. If the Kiwi pair breaks below the two-year low of 0.5770, it could fall to the November 2022 low of 0.5740 and the round-level support of 0.5700.

NZD/USD daily chart

• NZD/USD remains stronger following the release of domestic and Chinese data.
• China's Industrial Production rose by 5.4% YoY in November, exceeding market expectations of a 5.3% increase.
• The US Dollar remains subdued as Treasury yields hold thin losses.

NZD/USD breaks its four-day losing streak, trading around 0.5780 during the European hours on Monday. The New Zealand (NZD) remains stronger following the recent data from its largest trading partner, China. However, the upside of the Kiwi Dollar could be restrained due to the increased likelihood of a further aggressive easing approach from the Reserve Bank of New Zealand (RBNZ) early in 2025.

Recent reports indicate that China, a key trade partner for New Zealand, saw industrial output perform better than expected. However, this optimism was tempered by significantly lower-than-forecast Retail Sales and a continued decline in house prices.

China's annual Industrial Production rose by 5.4% in November, surpassing the market expectation of a 5.3% increase. In contrast, Retail Sales grew by 3.0% year-on-year in November, falling short of the anticipated 4.6% and the previous reading of 4.8%. 

Domestically, the Business NZ Performance of Services Index climbed to 49.5 in November, up from 46.2 in October, marking its highest level since February. Additionally, the Food Price Index increased by 1.3% year-on-year in November, slightly above the 1.2% rise recorded in October.

The US Dollar (USD) remains subdued amid tepid US Treasury yields ahead of the Federal Reserve’s (Fed) interest rate decision set for Wednesday. The Federal Reserve is widely expected to announce a 25 basis point rate cut in its final monetary policy meeting of 2024. According to the CME FedWatch tool, markets are now almost fully pricing in a quarter basis point cut at the Fed's December meeting.

The US Dollar Index (DXY), which measures the value of the US Dollar against its six major peers, trades near 106.80 with 2-year and 10-year yields on US Treasury bonds standing at 4.23% and 4.38%, respectively, at the time of writing.

• NZD/USD gains ground to around 0.5775 in Monday’s Asian session, adding 0.30% on the day. 
• China’s November Industrial Production climbed 5.4%, Retail Sales rose 3.0%. 
• A possible hawkish rate cut by the Fed could underpin the Greenback.  

The NZD/USD pair attracts some buyers to near 0.5775, snapping the four-day losing streak during the Asian trading hours on Monday. The attention will shift to the preliminary US December Purchasing Managers Index (PMI) for fresh impetus, which is due later on Monday. 

Data released by the National Bureau of Statistics of China showed on Monday that the nation’s Industrial Production rose 5.4% YoY in November, compared to 5.3% in October. This reading came in stronger than the expectation of 5.3%. Meanwhile, Retail Sales rose 3.0% YoY in November versus 4.8% prior, below the market consensus of 4.6%. The New Zealand Dollar (NZD) remains firm in an immediate reaction to the mixed Chinese economic data.

Chinese authorities announced on Thursday that they will unveil a bigger fiscal deficit to boost consumption next year following the Central Economic Work Conference. This follows a commitment made at the huddle of the decision-making Politburo last week to pump more stimulus into the world's second-largest economy. This, in turn, could underpin the China-proxy Kiwi, as China is a major trading partner to New Zealand. 

On the USD’s front, a possible hawkish rate cut by the Federal Reserve (Fed) at its December meeting on Wednesday might support the US Dollar (USD) and act as a headwind for the pair. The cautious approach reflects a strengthening US economy, noted by Chair Jerome Powell. Investors see the Fed lowering the interest rates by a quarter of a percentage point at the December meeting, with more attention focused on policymakers' new economic projections released alongside the decision.

• NZD/USD declines on Friday, settling around 0.5760 after trimming earlier gains near 0.5850.
• Pair remains capped by the 20-day SMA, with upside attempts thwarted by persistent selling pressure.
• RSI hovers near oversold territory at 34, while MACD histogram prints rising red bars, indicating intensifying bearish momentum.

The NZD/USD pair struggled on Friday, slipping by 0.14% to 0.5760 and failing to hold onto gains that briefly lifted it toward the 0.5850 area. Persistent selling pressure and the inability to break above the 20-day Simple Moving Average (SMA), currently near 0.5890, continue to weigh on the pair’s short-term prospects.

Technical indicators reinforce the bearish outlook. The Relative Strength Index (RSI) stands at 34, nearing oversold conditions, while still pointing downward and reflecting ongoing weakness. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram now prints rising red bars, signaling that bearish momentum is intensifying, despite the pair’s recent attempts at recovery.

With the NZD/USD drifting lower, immediate support lies around the 0.5750 region, followed by the psychological 0.5700 mark if the selling persists. On the upside, a decisive break above the 20-day SMA would be required to negate the current bearish bias and offer the bulls a chance to regain control.

NZD/USD daily chart

New Zealand Dollar (NZD) is likely to drift lower; any decline is unlikely to reach 0.5740. In the longer run, slight increase in momentum could lead to NZD testing the support at 0.5740, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

NZD can test the support at 0.5740

24-HOUR VIEW: “NZD fell to 0.5763 two days ago before recovering slightly. Yesterday, we held the view that it ‘could retest the 0.5765 level before a more sustained recovery can be expected.’ We indicated that ‘should NZD break above 0.5815, it would mean that the current downward pressure has faded.’ The subsequent price action unfolded differently than what we expected. NZD rose to a high of 0.5818 before dropping to 0.5763. NZD closed lower by 0.28% at 0.5768. Downward momentum has increased slightly, and NZD is likely to drift lower today. Given the mild downward momentum, any decline is unlikely to reach 0.6740. Resistance levels are at 0.5785 and 0.5800.”

1-3 WEEKS VIEW: “We indicated two days ago (11 Dec, spot at 0.5800) that NZD ‘may decline below 0.5770.’ However, we pointed out, ‘it remains to be seen if it can maintain a foothold below this level. Yesterday, NZD fell by 0.28% and closed at 0.5768. The resulting slight increase in momentum could lead to NZD testing the support at 0.6740. At this time, the probability of a sustained break below this level is not high. The mild downward pressure would remain intact as long as 0.5830 (‘strong resistance’ level was at 0.5845 yesterday) is not breached.”

• NZD/USD drifts lower for the fourth straight day and is pressured by a combination of factors.
• The RBNZ’s dovish tilt continues to weigh on the NZD on the back of US-China trade war fears.
• Bets that the Fed will pause its rate-cutting cycle underpin the USD and also weigh on the pair.

The NZD/USD pair prolongs its weekly downtrend for the fourth consecutive day and drops to the 0.5755 area, or a fresh low since November 2022 during the first half of the European session on Friday. 

The New Zealand Dollar (NZD) continues with its relative underperformance on the back of a more aggressive policy easing by the Reserve Bank of New Zealand (RBNZ) and concerns about China's economic recovery. The US Dollar (USD), on the other hand, consolidates its recent gains registered over the past week or so, to a fresh monthly peak and exerts additional downward pressure on the NZD/USD pair. 

This week's release of the US Consumer Price Index (CPI) and the Producer Price Index (PPI) indicated that the progress in lowering inflation to the Federal Reserve's (Fed) 2% target has virtually stalled. This, along with expectations that US President Donald Trump's expansionary policies will boost inflation, suggests that the Fed will adopt a more cautious stance on cutting interest rates going forward.

The prospects for a less dovish Fed remain supportive of a further rise in the US Treasury bond yields and continue to act as a tailwind for the USD. Apart from this, geopolitical risks stemming from the protracted Russia-Ukraine war and tensions in the Middle East, along with renewed trade war fears, further benefit the safe-haven Greenback and contribute to driving flows away from the risk-sensitive Kiwi. 

There isn't any relevant market-moving economic data due for release from the US on Friday, leaving the NZD/USD pair at the mercy of the USD price dynamics. Nevertheless, the aforementioned fundamental backdrop suggests that the path of least resistance for spot prices remains on the downside. Traders, however, might refrain from placing aggressive bets ahead of the crucial FOMC meeting next week.

• NZD/USD edges higher to around 0.5770 in Friday’s early Asian session. 
• US PPI increased by the most in five months in November, hotter than expected. 
• Trump tariff threats could undermine the China-proxy Kiwi.

The NZD/USD pair gains ground to near 0.5770 during the early Asian session on Friday. The Greenback strengthens due to the hotter-than-expected US Producer Price Index (PPI) report. The US Federal Reserve (Fed) interest rate decision will take center stage next week.

Data released by Business NZ  revealed that New Zealand’s Performance of Manufacturing Index (PMI) eased to 45.5 in November from 45.8 in the previous reading. The reading indicated that Manufacturing sector is still under significant pressure. 

Furthermore, the tariff threats from Trump’s administration have boosted the US Dollar (USD) across the board and created a headwind for the pair. Speculations about a potential 10% tariff on Chinese goods might drag the China-proxy New Zealand Dollar (NZD) lower as China has been the largest trading partner of New Zealand. 

On the USD’s front, financial markets have almost fully priced in a 25 basis points (bps) rate cut at the Fed's December 17-18 policy meeting, according to CME Group's FedWatch Tool. The US PPI for final demand jumped 0.4% MoM in November, the largest gain since June, after an upwardly revised 0.3% increase in October, the Labor Department's Bureau of Labor Statistics reported Thursday. This reading was better than the 0.2% expected. 

• NZD/USD surrenders daily gains as the US Dollar rebounds despite dovish Fed bets.
• The Kiwi pair exhibits a Bullish Divergence formation but will less likely get triggered.
• The RBNZ has reduced its interest rates by 125 bps to 4.25% this year.

The NZD/USD pair gives up its intraday gains and returns below the round-level figure of 0.5800 in Thursday’s early North American session. The Kiwi pair falls back as the US Dollar (USD) reverses losses even though traders have priced in the Federal Reserve (Fed) to cut interest rates by 25 basis points (bps) to 4.25%-4.50% after the two-day monetary policy meeting on Wednesday.

The Kiwi pair has been battered badly for more than two months and is wobbling near the two-year low. The asset has faced an intense sell-off as the outlook of the New Zealand Dollar (NZD) has weakened, given that the Reserve Bank of New Zealand (RBNZ) has reduced its Official Cash Rate (OCR) aggressively by 125 basis points (bps) to 4.25% in three policy meetings.

The RBNZ was compelled to follow an aggressive policy-easing cycle due to slowing inflationary pressures, weakening labor demand, and poor business activity.

Meanwhile, the US Dollar performs strongly across the board on expectations that policies of higher import tariffs and lower income taxes by President-elect Donald Trump will be inflationary for the United States (US) economy.

NZD/USD daily chart shows a Bullish Divergence formation, which suggests a slowdown in the selling momentum that results in a reversal move. While the asset has formed a lower low formation on a daily timeframe, the 14-day Relative Strength Index (RSI) has made higher lows. The formation needs confirmation to set off a bullish reversal.

A decisive break above the November 29 high of 0.5930 could confirm a reversal setup and push it higher to the November 15 high of 0.5970 and the psychological resistance of 0.6000.

However, the chances of a bullish divergence confirmation are weak due to unsupportive NZ fundamentals, which could take the Kiwi pair lower to the November 2022 low of 0.5740 and the round-level support of 0.5700 if it breaks below the two-year low of 0.5770.

NZD/USD daily chart

New Zealand Dollar (NZD) could retest the 0.5765 before a more sustained recovery can be expected. In the longer run, NZD may decline below 0.5770, but it remains to be seen if it can maintain a foothold below this level, UOB Group’s FX analyst Quek Ser Leang and Lee Sue Ann note.  

NZD may decline below 0.5770

24-HOUR VIEW: “While we expected NZD to ‘decline further’ yesterday, we indicated that ‘deeply oversold conditions suggest NZD may not be able to break clearly below the major support at 0.5770.’ NZD fell more than expected to 0.5763 before recovering to close at 0.5784 (-0.29%). While there has been no further increase in momentum, NZD could retest the 0.5765 level before a more sustained recovery can be expected. The next support at 0.5740 is not expected to come into view. On the upside, should NZD break above 0.5815, it would mean that the current downward pressure has faded.”

1-3 WEEKS VIEW: “We indicated yesterday (11 Dec, spot at 0.5800) that NZD ‘may decline below 0.5770.’ However, we pointed out, ‘it remains to be seen if it can maintain a foothold below this level.’ NZD subsequently dropped to 0.5763 before recovering. There has been no further increase in momentum. For NZD to decline further, it must hold below 0.5770. The likelihood of this happening will remain intact provided that 0.5845 (‘strong resistance’ level was at 0.5865 yesterday) is not beached. Looking ahead, the next level to monitor below 0.5770 is 0.5740.”