The NZD/USD pair has been climbing for seven consecutive days, hitting its highest level since September 2025 due to a weaker US Dollar. The pair remains stable around the 0.5965-0.5970 region during the European session, indicating a potential for further appreciation.
From a technical standpoint, a recent breakout above key hurdles around the 0.5750-0.5860 zone supports a bullish outlook. The Moving Average Convergence Divergence (MACD) and the Relative Strength Index (RSI) indicate strengthening bullish momentum, despite the RSI being overbought at 75.8. The 78.6% Fibonacci retracement at 0.6003 may pose immediate resistance.
Factors Influencing The Kiwi
New Zealand’s Dollar, known as the Kiwi, is influenced by its economy, central bank policy, and trade relations, particularly with China. Changes in the dairy industry and economic data are pivotal in affecting the NZD’s value.
Decisions by the Reserve Bank of New Zealand (RBNZ) on interest rates impact the NZD, with rate increases potentially boosting its value. The broader market risk sentiment can also sway the NZD, with the currency generally strengthening during optimistic market phases and weakening during uncertainty.
We are seeing the NZD/USD pair continue its strong upward move, having broken through significant technical hurdles last week. The push past the 0.5900 level confirms a bullish outlook for the near term. This momentum is largely fueled by a weakening US Dollar as the pair now trades at its highest point since September 2025.
Inflation And Dairy Prices
This trend is underpinned by diverging central bank expectations, which we see as a key driver. Recent Q4 2025 inflation data for New Zealand came in at 4.7%, still well above the Reserve Bank of New Zealand’s target, suggesting they will remain hesitant to cut interest rates. In contrast, the latest US core PCE data from December 2025 fell to a two-year low of 2.9%, increasing market bets on Federal Reserve rate cuts in early 2026.
Adding to the Kiwi’s strength, dairy prices have been firming up, with the Global Dairy Trade Price Index rising 2.3% in the first auction of this month. As dairy is New Zealand’s primary export, this provides a fundamental boost to the currency’s value. This positive economic signal reinforces the bullish sentiment surrounding the NZD.
However, a note of caution comes from China, which saw its manufacturing PMI contract for a third consecutive month in December 2025. Since China is New Zealand’s biggest trading partner, a slowdown there could eventually weigh on the Kiwi’s rally. This is a key risk factor we are monitoring closely.
Given the Relative Strength Index (RSI) is in overbought territory above 75, traders should be cautious about chasing this rally at current levels. The more prudent strategy in the coming weeks would be to use any pullbacks toward the 0.5900-0.5915 area as buying opportunities for a potential move towards the 0.6000 resistance level. Using options, one might consider buying call spreads on dips to define risk while maintaining upside exposure.
