NZD/USD Pair Faces Selling Pressure
The NZD/USD pair is seeing continued selling interest for the second consecutive day, currently trading around the 0.5720-0.5715 range during the Asian session on Monday. It’s hovering near a two-month low that was established last week.
The New Zealand Dollar (NZD) has been struggling, largely due to the Reserve Bank of New Zealand’s (RBNZ) dovish approach to rate hikes, particularly in light of sluggish domestic growth. In contrast, the US Federal Reserve has adopted a more hawkish tone and indicated plans for at least one more rate increase this year after raising rates for the first time in three years recently. This divergence, coupled with ongoing geopolitical uncertainties, supports the demand for the safe-haven US Dollar (USD) and puts pressure on the NZD/USD pair.
Nordea’s Take on Fed Policy Stance
Economists from Nordea express that the US economy is exhibiting resilience, with persistent inflationary pressures and a stable labor market. They argue that this scenario strengthens the case for a tighter monetary policy. While Nordea maintains its prediction of two additional rate hikes, they also point out that the risks lean upwards, suggesting that the Fed might need to take more actions than currently expected.
Recent developments in the Middle East reveal that Iran-backed Houthis in Yemen claimed responsibility for missile and drone attacks on key sites in Saudi Arabia’s capital, Riyadh. Furthermore, Iran has outlined seven conditions for resuming negotiations with the US, including demands to end the war on all fronts and release Iranian assets. Such geopolitical tensions continue to weigh on the market and support the strength of the Greenback.
On another front, a rebound in oil shipments from Saudi Arabia has led to a drop in prices to over a week’s low, which might ease some inflation concerns. This situation keeps US bond yields below their recent multi-year highs, preventing USD bulls from making aggressive moves. Additionally, traders appear cautious ahead of an upcoming meeting between US President Donald Trump and Chinese President Xi Jinping, which might influence antipodean currencies like the Kiwi.
Technical Analysis of NZD/USD
The NZD/USD pair retains a bearish near-term outlook, and a breach below the 78.6% Fibonacci retracement support near the 0.5700 level could lead to further declines towards a deeper Fibonacci floor around 0.5624.
On the upside, initial resistance can be found at the 61.8% Fibonacci retracement near 0.5763, followed by the 50.0% level at 0.5806. Beyond that, a significant resistance zone forms around the 38.2% retracement at 0.5849, along with the 200-day simple moving average at 0.5853, and further resistance at the 23.6% level at 0.5902, along with a recent swing high around 0.5988.
