NZD/USD Price Forecast: Posts mild gains near 0.5850 but bearish momentum signals capped upside
- NZD/USD trades with mild gains near 0.5855 in Thursday’s early European session.
- Financial markets raise their bets that the Fed will increase interest rates in September following Warsh’s speech.
- Further consolidation cannot be ruled out, with bearish RSI momentum.
- The first upside target is seen in the 0.5900-0.5910 region; the initial support level to watch is 0.5845.
The NZD/USD pair posts modest gains around 0.5855 during the early European trading hours on Thursday, supported by stronger-than-expected Chinese economic data. Attention will shift to the US August employment data, which will be released later on Friday.
China’s services activity expanded at a faster pace in August, with the Services Purchasing Managers' Index (PMI) rising to 51.4 from 50.4 in July, RatingDog showed on Thursday. This figure came in above the market consensus of 50.6. This report provides some support to the China-proxy Kiwi, as China is a major trading partner of New Zealand.
On the other hand, Federal Reserve (Fed) Chair Kevin Warsh’s speech at the Jackson Hole symposium has bolstered expectations of a rate hike in September. Warsh said last week that recent inflation data had been moderate, but this was not enough to consider underlying inflation trends to have improved substantially. Warsh further stated that the Fed must be confident that inflation is moving toward the target level clearly and quickly enough.
His hawkish comments could underpin the Greenback and act as a headwind for the pair. The probability of a Fed rate hike in September rose to 66.1% after Warsh’s speech, according to CME Group FedWatch tool.
RBNZ lifts rates as Commerzbank highlights gradual withdrawal of stimulus
According to analysts at Commerzbank, the Reserve Bank of New Zealand has raised the Overnight Cash Rate (OCR) by 25bp to 2.75% “as expected,” with policymakers judging that “a gradual removal of monetary stimulus was appropriate to return inflation sustainably to the target.” The bank notes that the move underscores the RBNZ’s focus on carefully normalising policy while keeping inflation anchored within its mandated range.
Technical Analysis: Rallies of NZD/USD could remain limited in the near term
In the daily chart, NZD/USD is consolidating after its recent pullback, holding just above the 100-day simple moving average (SMA) and the lower Bollinger band, which together define a tight demand zone. However, the Relative Strength Index (14) at 43.46 stays below the midline and hints at mildly bearish momentum, suggesting that rallies could remain limited while this indicator fails to recover toward 50.
On the topside, initial resistance level emerges in the 0.5900-0.5910 zone, representing the psychological level and the Bollinger middle band. A stronger supply anticipated at the upper boundary of the Bollinger Band near 0.5988.
On the downside, the immediate support level is seen at the 100-day SMA at 0.5845, followed by the lower limit of the Bollinger band at 0.5827. A clear break would open the door to the July 27 low of 0.5771.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.