NZD/USD rose to a near two-week high in the Asian session on Wednesday, trading around 0.6065 after a small dip the day before. The move came as the US Dollar stayed weak ahead of the US Nonfarm Payrolls (NFP) report.
Markets are focused on the NFP release for guidance on the Federal Reserve’s policy path, with rate cut expectations for 2026. Concerns about the Fed’s independence also kept the Dollar near its lowest level in over a week.
Risk Appetite Supports The Kiwi
Improved risk appetite reduced demand for the Dollar and supported the New Zealand Dollar. This helped offset softer inflation data from China, which pointed to weak household demand and ongoing deflation risks.
China’s Consumer Price Index rose 0.2% year on year in January, down from 0.8% the month before. Producer prices fell 1.4% year on year, marking a 40th straight month of contraction.
The China figures increased expectations of more fiscal and monetary support, which can lift antipodean currencies. However, a rise in New Zealand’s unemployment rate in Q4 2025 reduced the chance of tighter Reserve Bank of New Zealand policy and may limit further NZD/USD gains.
We are seeing the NZD/USD pair test a two-week high near 0.6065, a move driven almost entirely by broad weakness in the US Dollar. The immediate focus for any strategy is the upcoming US Nonfarm Payrolls (NFP) report, which will be a major catalyst. This setup creates opportunities for options traders who can position for the potential volatility.
Options Positioning Ahead Of Nfp
The bearish sentiment towards the dollar is rooted in firm expectations for Federal Reserve interest rate cuts this year. Currently, fed funds futures markets are pricing in an over 85% probability of at least one rate cut by the Federal Reserve’s June 2026 meeting. This has helped push the US Dollar Index (DXY) below the 103.00 level, a key psychological support.
We remember how several NFP reports in the latter half of 2025 caused sharp, multi-day reversals in major currency pairs. This historical volatility suggests that buying option straddles, which profit from a large price move in either direction, could be a prudent way to trade the event risk. A payrolls number that deviates significantly from consensus will likely dictate the dollar’s direction for the rest of February.
On the other side of the trade, the New Zealand dollar has its own headwinds which may cap significant gains. The rise in New Zealand’s domestic unemployment rate to 4.3% in the final quarter of 2025 has effectively taken any rate hikes from the Reserve Bank of New Zealand off the table. This, combined with persistent deflationary pressure from China, our largest trading partner, suggests the Kiwi’s strength is fragile.
Given this context, we believe traders could consider buying NZD/USD call options with near-term expiries to capitalize on the current upward momentum heading into the NFP release. However, these positions should be protected with put options or a clear exit plan. A surprisingly strong US jobs report would quickly challenge the Fed rate cut narrative and could send this pair sharply lower.
