NZD/USD seems vulnerable around mid-0.5800s; below 200-day SMA ahead of Fed, NZD GDP
- NZD/USD drifts lower during the Asian session amid the emergence of some USD buying.
- A recovery in the global risk sentiment could cap the safe-haven USD and support the pair.
- Traders also await the Fed rate decision on Wednesday and the NZ GDP print on Thursday.
The NZD/USD pair meets with a fresh supply during the Asian session on Tuesday and erodes a part of the previous day's solid recovery from the vicinity of a one-month low, touched last week. Spot prices currently trade just below mid-0.5800s and seem vulnerable while below a technically significant 200-day Simple Moving Average (SMA).
Investors now seem worried that a surge in Crude Oil prices following the US-Israel strikes on Iran would revive inflationary pressures and force the US Federal Reserve (Fed) to delay cutting interest rates. This assists the US Dollar (USD) to attract some dip-buyers and stall the overnight pullback from its highest level since May 2025, which, in turn, is seen as a key factor exerting some downward pressure on the NZD/USD pair.
Meanwhile, the Iran war has added a new layer of tension to the already strained relations between the US and China. In fact, US President Donald Trump said on Monday that he is planning to delay a high-stakes visit to China later in March by about a month because of the Iran war. This turns out to be another factor that undermines antipodean currencies, including the Kiwi, and contributes to the NZD/USD pair's downtick.
That said, efforts to reopen shipping traffic in the Strait of Hormuz boost investors' confidence. This is evident from a modest recovery in the global risk sentiment, which might keep a lid on any further appreciation for the safe-haven buck. Traders might also opt to wait on the sidelines ahead of the highly-anticipated FOMC policy decision on Wednesday. This, in turn, could act as a tailwind for the NZD/USD pair and help limit losses.
Investors this week will also confront the release of the quarterly GDP report from New Zealand, which could influence the New Zealand Dollar (NZD). Nevertheless, the aforementioned fundamental backdrop, along with a failure near the 200-day SMA, suggests that the path of least resistance for the NZD/USD pair is to the downside. Hence, any attempted recovery could be seen as a selling opportunity and is likely to remain limited.
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
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
