NZD/USD saw a dip after mixed employment data from New Zealand influenced market activity. The US Dollar gained strength due to a cautious market mood, impacting the risk-sensitive New Zealand Dollar.
However, the outlook from the Reserve Bank of New Zealand remains hawkish, contrasting with the US Federal Reserve’s plans to cut rates further in 2026, limiting the Kiwi’s downside. The pair is trading around 0.6040-0.6035, down almost 0.30% for the day.
Technical Indicators Suggest Caution
Technical indicators suggest caution for bears due to the NZD/USD’s resilience above the 200-day Simple Moving Average (SMA) and the broader uptrend. The MACD remains positive, although signals of moderating momentum are present. The Relative Strength Index is at 68, suggesting bullish conditions just under overbought levels.
The NZD is influenced by New Zealand’s economic health and central bank policy, with China’s economy and dairy prices playing a role. The Reserve Bank of New Zealand’s interest rate decisions impact NZD, with higher rates boosting its strength. Economic data and broader market sentiment also influence the currency’s value, affecting risk-on and risk-off periods.
From our current perspective on February 4, 2026, the divergence between central banks that we noted last year remains the primary driver. The NZD/USD pair is sitting near 0.6250, reflecting the ongoing weakness in the US Dollar. We should continue to frame our strategies around the contrasting policies of the Reserve Bank of New Zealand (RBNZ) and the US Federal Reserve.
The RBNZ continues its hawkish stance, holding the Official Cash Rate at 5.50% to fight persistent domestic inflation, which registered at 3.8% in the last quarter of 2025. While New Zealand’s unemployment rate did tick up to 4.1% in Q4 2025 data released last month, this is not enough to force the RBNZ’s hand just yet. This supports the base strength of the Kiwi dollar.
External Factors and Currency Forecast
Meanwhile, the Federal Reserve is following the path anticipated back in 2025, having already cut rates once. Market pricing currently implies a more than 70% probability of another rate cut by the June 2026 meeting, keeping downward pressure on the US Dollar. This widening rate differential in favor of the NZD is a core tenet of our bullish thesis.
External factors are also providing a tailwind for the New Zealand dollar. The most recent Global Dairy Trade auction saw prices jump by 3.2%, continuing a positive trend from late 2025 and boosting New Zealand’s terms of trade. We are also seeing a tentative recovery in China, with its latest manufacturing PMI coming in at 50.5, which helps ease concerns about demand from New Zealand’s largest trading partner.
Looking at the charts, the breakout above the 200-day Simple Moving Average we watched in early 2025 proved to be a critical turning point. That moving average now serves as a key support level, currently found near 0.6100. We should view any dips toward this level as opportunities to initiate or add to long positions, perhaps by buying call options to limit risk while capturing upside potential.
