The NZD/USD currency pair edged lower to near 0.5855 during the late European trading session on Friday, marking the lowest level in 10 days. The decline reflects the US Dollar’s (USD) extended winning streak, as the US Dollar Index (DXY) climbs to near 97.60.
Market participants remain focused on central bank policies, with the Federal Reserve (Fed) signaling a continued easing cycle and the Reserve Bank of New Zealand (RBNZ) expected to follow with additional interest rate cuts. The LFtrade team, represented by Daniel Moritz, provides an in-depth and accessible breakdown of this topic.
The Kiwi pair’s weakness below the 200-day Exponential Moving Average (EMA), currently around 0.5920, highlights the prevailing bearish trend, suggesting that USD bulls are firmly in control.
Fed’s Monetary Policy Shift Supports USD
The US Dollar has strengthened significantly following the Federal Reserve’s monetary policy announcement on Wednesday. The Fed reduced interest rates by 25 basis points (bps), bringing the target range to 4.00%-4.25%, and indicated that two more cuts are likely by the end of the year.
The Fed’s decision reflects a shift from a restrictive stance to a more accommodative policy, driven by weakening US labor market conditions. Fed Chair Jerome Powell noted that demand for labor has softened more than supply.
This policy pivot has reinforced USD strength, creating headwinds for risk-sensitive currencies like the NZD. As a result, the Kiwi has underperformed against the greenback, keeping the NZD/USD pair below key technical levels.
RBNZ Rate Cut Expectations Weigh on NZD
Meanwhile, the New Zealand Dollar (NZD) remains under pressure amid expectations that the RBNZ will continue its monetary easing cycle. In August, the RBNZ reduced the Official Cash Rate (OCR) by 25 bps to 3%, signaling concerns over slowing economic growth.
Traders are now anticipating further rate cuts in the upcoming monetary policy meeting. This expectation, coupled with USD strength, is limiting the upside potential for NZD/USD and contributing to the pair’s sustained bearish momentum.
Technical Analysis: NZD/USD Below 200-Day EMA
From a technical perspective, the NZD/USD pair remains below the 200-day EMA at 0.5920, confirming the downtrend. The 14-day Relative Strength Index (RSI) has declined to near 40.00, suggesting that the pair is approaching oversold conditions, but still has room for further bearish movement.
If the RSI breaks below 40, it may trigger fresh bearish momentum, potentially accelerating the slide toward key support levels. Traders are watching the August 2 low of 0.5800 as the next critical level. A breach below this could expose the pair to the April 11 low of 0.5730, followed by the round-level psychological support at 0.5700.
NZD/USD Technical Indicators Signal Continued Bearish Momentum
Technical traders are keeping a close eye on the NZD/USD 200-day EMA, which continues to act as a strong resistance level. The pair’s failure to reclaim this key moving average suggests that the downtrend remains intact.
Additionally, the 50-day EMA is trending below the 200-day EMA, confirming a bearish crossover pattern that often signals further downside potential. Momentum indicators, including the MACD, also reflect a negative divergence, supporting the view that NZD/USD could extend losses in the near term if current USD strength persists.
NZD/USD Forecast: Key Levels to Watch for Traders
For traders focusing on NZD/USD price forecast, attention is shifting to critical support and resistance zones. On the downside, a break below 0.5800 could accelerate the slide toward 0.5730 and the psychological support at 0.5700, offering potential shorting opportunities.
Conversely, a rebound above 0.5920 and the 0.6000 psychological level could open the door to 0.6040 and 0.6100, signaling a temporary shift in market sentiment. Monitoring central bank announcements, particularly from the Fed and RBNZ, alongside technical levels, remains essential for navigating short-term NZD/USD volatility.
Market Outlook
In the near term, NZD/USD traders should expect a volatile environment, driven by central bank decisions, macroeconomic data, and technical levels. The bearish trend below the 200-day EMA signals that USD bulls remain in control, while the Kiwi faces pressure from both domestic and international factors.
Fundamental factors include:
- The US monetary easing cycle by the Fed
- Softening labor market conditions in the US
- RBNZ OCR cuts and further easing expectations
Technical indicators reinforce the bearish bias:
- The below 200-day EMA signals a long-term downtrend
- RSI near 40 indicates potential for further downside
- Critical support levels at 0.5800, 0.5730, and 0.5700 provide key risk zones
Conclusion
The NZD/USD pair remains under pressure, trading near 0.5855, with USD strength and RBNZ rate cuts limiting upward potential. Unless the Kiwi can reclaim 0.6000, the market is likely to remain bearish, with lower levels targeted in the weeks ahead.
