Kiwi climbs as NZD/USD pair approaches key resistance amid upbeat market mood
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Daily Currency Update
The NZD/USD currency pair trades notably higher on Monday, advancing by 0.66%, to hover near the US$0.5930 level during the European trading session. The New Zealand dollar (NZD), commonly referred to as the Kiwi, is showing relative strength against the U.S. dollar, supported by broad-based risk-on sentiment in global markets.This upbeat market mood is encouraging investors to rotate into higher-yielding and risk-sensitive currencies like the NZD, pushing the pair higher. The current upside momentum reflects improving confidence among traders, especially as the U.S. dollar continues to lose ground amid growing expectations of more aggressive monetary easing by the Federal Reserve. At the same time, stabilising global commodity prices and a positive tone in equity markets are also providing an added lift to the Kiwi.
Looking ahead, technical levels will play a crucial role in determining the pair’s next direction. If the NZD/USD pair manages to reclaim and hold above the key psychological barrier at US$0.60, it could open the door for a further rally. In such a scenario, the pair may target the June 19 swing high at US$0.6040, followed by a potential advance toward the September 11 low at US$0.61, which now serves as a resistance zone.
On the flip side, if the pair fails to sustain its upward trajectory and instead drops below the August 2 low of US$0.58, it may face renewed selling pressure. Such a move could expose the Kiwi to further downside toward the April 11 low of US$0.5730, and eventually the round-figure support at US$0.57, which would be a critical level for bulls to defend.
In the near term, the NZD/USD pair remains sensitive to broader market risk sentiment and developments in global central bank policy outlooks, particularly from the Federal Reserve and the Reserve Bank of New Zealand (RBNZ). Traders will continue to monitor macroeconomic cues and geopolitical events for direction.
Key Movers
Last Friday, the U.S. Nonfarm Payrolls (NFP) report for August revealed that only 22,000 jobs were added to the economy, falling significantly short of market expectations. This underwhelming employment growth signals a potential cooling in the labour market, adding to concerns about the underlying strength of the U.S. economy.As a direct result, the Unemployment Rate ticked higher, rising from 4.2% to 4.3%, reinforcing the narrative that economic momentum may be weakening. The soft jobs data has solidified market expectations for a 25-basis point (bps) interest rate cut by the Federal Reserve at its upcoming policy meeting in September. This would mark a continuation of the Fed’s shift toward a more accommodative monetary stance as it responds to signs of a slowing economy and easing inflationary pressures.
While a larger 50 bps rate cut remains a possibility, the probability remains low, currently priced at around 8% according to market-based forecasts. Such a move would likely require a more substantial deterioration in key economic indicators or a sharp decline in inflation data.
Looking ahead, all eyes will be on the U.S. Consumer Price Index (CPI) report for August, which is due to be released later this week. The CPI is a key gauge of inflation and will be closely scrutinised by traders and policymakers alike. A weaker-than-expected CPI print could further strengthen the case for not just a 25 bps cut but potentially open the door to discussions about more aggressive easing down the line.
Ultimately, the combination of slowing job growth, rising unemployment and potentially subdued inflation could provide the Fed with greater flexibility to loosen monetary policy further in the coming months, especially if downside risks to the economy continue to mount.
Expected Ranges
- NZD/USD: 0.5800 - 0.6000 ▲
- NZD/EUR: 0.4950 - 0.5150 ▲
- GBP/NZD: 2.2800 - 2.3000 ▼
- NZD/AUD: 1.1000 - 1.1200 ▼
- NZD/CAD: 0.8100 - 0.8300 ▲