NZD/USD: Buyers continues to probe key levels, 0.5700 now in sight
- NZDUSD recovers from the 0.5565 low recorded on October 14.
- Lower US yields support buyers despite hotter-than-expected CPI and PPI prints.
- Price faces resistance around 0.5680, but the bigger test awaits at 0.5700.
NZD/USD has consistently pushed lower since August, with price falling to a low around 0.5565 on October 14. Higher US Treasury yields and a hawkish Federal Reserve have been credited as the major drivers of the decline. However, NZD/USD has now recovered a significant portion of its October losses and is pushing towards 0.5680.
The recovery has been supported by retreating US yields despite hotter-than-expected US inflation data. Both CPI and PPI came in above expectations, but the market remains convinced that the Federal Reserve will leave interest rates unchanged in October, with the CME FedWatch Tool showing an approximately 85.1% probability of a hold.
Price is currently struggling near resistance around 0.5680, but the current fundamental landscape does not present a compelling argument for sellers at this time. At the time of writing, the US 10-year Treasury yield trades around 5.10%, falling from a high near 5.328% on October 14.
The New Zealand dollar has also received support from a series of positive economic releases from China, the latest being a stronger-than-expected Q3 GDP report. China’s economy grew by 4.5% year-on-year, above the 4.4% forecast and the 4.3% recorded in the previous quarter. However, the main driver of the NZD/USD recovery remains the retreat in US yields.
If yields continue to decline, NZD/USD could extend its recovery, clear the resistance around 0.5680 and test the 0.5700 level. It remains to be seen whether buyers have enough resolve to push above this level or whether sellers will return and regain control of the pair.
Fundamentally, the New Zealand dollar does not have a major fresh domestic catalyst at the moment, but that could change with the release of New Zealand’s quarterly inflation report on Thursday. The data could strengthen expectations of another RBNZ rate hike before the end of the year or reduce the likelihood of further tightening.
NZD/USD buyers would be encouraged by a much stronger-than-expected inflation print that raises expectations of another RBNZ response. Combined with a further decline in US Treasury yields, this could keep hopes of a break above 0.5700 alive and potentially support a broader recovery in the pair.
Author
Olalekan Akinola
Independent Analyst
Olalekan Akinola is a financial-markets analyst and writer with five years of experience covering forex, commodities, and global macroeconomic developments.
