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NZD/USD Price Forecast: Trades below 0.5900 as bulls seem hesitant amid cautious mood

  • NZD/USD remains on the defensive, though it lacks bearish conviction amid mixed cues.
  • Hormuz risks offer support to the safe-haven USD and undermine the risk-sensitive Kiwi.
  • Iran diplomacy hopes cap the USD and help limit losses for the pair amid a bullish setup.

The NZD/USD pair trades with a mild negative bias for the second straight day and remains on the back foot below the 0.5900 mark through the Asian session on Friday. The lack of follow-through selling, however, warrants caution before positioning for an extension of the previous day's retracement slide from the 0.5920-0.5925 region, or an over one-month high.

Despite the latest optimism led by the Israel-Lebanon 10-day truce, investors remain cautious ahead of another round of US-Iran peace talks and the ongoing American naval blockade of Iranian ports. This, in turn, is seen offering some support to the safe-haven US Dollar (USD) and acting as a headwind for the NZD/USD pair. That said, hopes for a potential US-Iran peace deal, along with diminishing odds for a rate hike by the US Federal Reserve (Fed), cap the USD and help limit losses for the currency pair.

Last week, spot prices confirmed a bullish breakout through the 0.5835-0.5840 confluence – comprising the 200-day Simple Moving Average (SMA) and the 38.2% Fibonacci retracement level of the January-April fall. The subsequent move beyond the 50% retracement level, however, stalls ahead of the 61.8% Fibo. level, which is currently pegged near the 0.5930-0.5935 region and should act as a key pivotal point. A sustained move beyond should pave the way for further gains to 0.6004 and the cycle high at 0.6093.

Meanwhile, momentum indicators are supportive rather than aggressive, with the Relative Strength Index (RSI) hovering near 56 and the Moving Average Convergence Divergence (MACD) line in positive territory. This hints that upside pressure is gradually strengthening.

Hence, any further slide is likely to find immediate support near the 50% retracement at 0.5885, followed by the 200-day SMA at 0.5845 and the 38.2% Fibo. level at 0.5836. A deeper pullback toward 0.5776 and the 0.5678 swing low would only come into focus if these nearby floors give way.

(The technical analysis of this story was written with the help of an AI tool.)

NZD/USD daily chart

Chart Analysis NZD/USD

New Zealand Dollar FAQs

The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.

The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.

Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.

The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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