The NZD/USD currency pair has advanced to near 0.5870, as the New Zealand Dollar (NZD) continues to outperform its peers in the forex market.
The pair traded 0.45% higher during European trading hours on Friday, reflecting a risk-on market sentiment that has seen investors favor high-yielding currencies amid signs of stability in the New Zealand economy. LevaQuant’s broker, Simon Janssen, covers every important aspect of this topic in this article.
Risk Appetite Supports NZD Strength
The broader market sentiment remains positive, with S&P 500 futures trading higher in the European session. This upward momentum in equity markets indicates an increase in investor risk appetite, which typically benefits commodity-linked currencies like the Kiwi Dollar.
As market participants seek higher-yielding assets, the NZD has seen a notable appreciation against the US Dollar (USD).
US NFP Data in Focus
Attention in the forex market now turns to the upcoming US Nonfarm Payrolls (NFP) report for August, scheduled for release at 12:30 GMT. This report, which details employment growth, wage data, and the unemployment rate, is a critical economic indicator for the United States.
Market expectations currently anticipate a modest increase in payrolls, with 75,000 jobs expected to have been added, slightly above the previous 73,000 reading. The Unemployment Rate is projected to rise to 4.3% from 4.2%, signaling potential softening in the US labor market.
The USD is currently under selling pressure, as traders position ahead of the NFP release, anticipating that weaker-than-expected employment data could influence the Federal Reserve’s (Fed) interest rate decisions.
Technical Outlook
From a technical analysis perspective, NZD/USD faces resistance near the 20-day Exponential Moving Average (EMA), currently trading around 0.5887. A break above this level could trigger a short-term bullish trend, targeting psychological levels at 0.6000 and potentially testing the June 19 high of 0.6040.
Further upside may extend toward the September 11 low of 0.6100 if bullish momentum persists.
Conversely, the 14-day Relative Strength Index (RSI) has slid to near 40.00, indicating a neutral-to-bearish momentum. A break below this level could open the door for further downside, targeting the August 2 low of 0.5800, followed by the April 11 low of 0.5730 and the round-level support of 0.5700.
Traders should monitor these key support and resistance levels closely to gauge the strength of the ongoing trend.
Scenarios for NZD/USD
Bullish Scenario: If NZD/USD manages to sustain above 0.5887, the pair could quickly advance toward 0.6000, a psychological level that could act as a springboard for further gains. A sustained push above 0.6000 may open a path to the June 19 high of 0.6040, followed by the September 11 low of 0.6100.
Bearish Scenario: On the downside, a failure to hold near the 20-day EMA could result in a pullback toward 0.5800, exposing the April 11 low of 0.5730. Further declines could see the NZD/USD pair testing the critical support level at 0.5700, a key psychological threshold that could determine the medium-term direction of the currency pair.
Market Sentiment and Trading Implications
The NZD/USD outlook remains heavily influenced by both fundamental and technical factors. On the fundamental front, US labor data and Fed interest rate expectations are the primary drivers. On the technical side, the 20-day EMA, RSI levels, and key support/resistance zones are crucial for short-term traders.
Given the risk-on sentiment, strong NZD performance, and anticipated Fed rate cuts, traders may look for long positions above the 0.5887 level, while short positions could be considered if bearish momentum strengthens and the RSI breaks below 40.
Conclusion
In summary, the NZD/USD pair continues to reflect the strength of the Kiwi Dollar amid a weakening US Dollar and positive global market sentiment. With the US NFP report for August imminent and Fed rate expectations pointing to potential cuts, the forex market is likely to experience heightened volatility in the coming sessions.
Traders should monitor key technical levels such as the 20-day EMA, RSI, and psychological thresholds at 0.5800 and 0.6000 to navigate the market effectively.
The NZD/USD price forecast remains dynamic, with upside potential toward 0.6040–0.6100 if the Kiwi maintains its strength, while downside risks remain if bearish momentum dominates. For traders, the immediate focus will be on US NFP data and subsequent Fed policy signals, which are poised to shape the trajectory of the Kiwi Dollar against the US Dollar in the short term.
