The NZDUSD pair experienced fluctuations due to the US dollar’s shift, prompted by Fed Chair Powell’s dovish comments. With an 85% probability for a rate cut in September, traders anticipate 54 bps of easing by year-end. The US NFP report next week is expected to influence interest rate expectations significantly. Strong data may lower cut probabilities, while weak data could increase bets for a third cut by year-end.<\/p>\n
On the New Zealand side, the RBNZ’s dovish rate cut projected two additional cuts. Minutes showed a discussion of a 50 bps cut, with two members supporting it. The NZD initially declined but recovered due to Powell\u2019s dovish tone. Technical analyses outline the NZDUSD near a key zone around 0.5850, where sellers may position for drops and buyers aim for a breakout toward 0.5970.<\/p>\n
In the 4-hour and 1-hour charts, trends suggest potential upside, but a fakeout remains possible. Buyers likely seek highs, while sellers monitor for price drops below the 0.5850 level. Upcoming economic data includes the US Consumer Confidence report, Jobless Claims figures, and the PCE price index.<\/p>\n
We are watching the NZD\/USD pair closely around the 0.5850 level, a key zone reached after Fed Chair Powell\u2019s dovish comments last Friday. This rally in the kiwi erased losses from our own RBNZ\u2019s recent dovish rate cut. The market is now pricing in an 85% chance of a US rate cut in September.<\/p>\n
This shift from the Fed didn’t come from nowhere, as we saw the July NFP report come in below expectations at 155,000 jobs. With the latest CPI data from early August 2025 also showing inflation easing to 2.9%, this week’s PCE inflation report on Friday is now the main event. A soft number would likely cement the case for a September rate cut.<\/p>\n
On our side, the RBNZ\u2019s dovish stance was justified by New Zealand’s sluggish Q2 GDP growth of just 0.2% and inflation cooling more rapidly than anticipated. This creates a challenging dynamic where both central banks are leaning towards easing policy. Essentially, it’s a question of which currency will weaken faster.<\/p>\n
Given the uncertainty around the 0.5850 level and major US data this week, we see implied volatility ticking up. Derivative traders should consider strategies that benefit from a significant price move, regardless of direction. Buying a strangle, using out-of-the-money puts and calls, could be a cost-effective way to position for a breakout after the PCE data.<\/p>\n
For those with a directional bias, the current setup offers clear levels for option plays. We could see traders buying put options with a strike price below 0.5800 to bet on a rejection from this zone, offering defined risk. Conversely, a clean break above 0.5850 might trigger buying of call options targeting the 0.5970 trendline.<\/p>\n
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