NZD/USD halted a six-day slide on Thursday as the US Dollar softened after US Personal Consumption Expenditures data broadly matched expectations. The pair was trading near 0.5650, little changed and close to seven-month lows. Core PCE inflation rose to 3.4% year on year in May from 3.3% in April, while the monthly rate stayed at 0.3%. Headline PCE accelerated to 4.1% year on year from 3.8%, the highest annual reading since April 2023.
After the release, markets trimmed expectations of a September Fed rate rise; the CME FedWatch Tool put the probability at 60%, down from 67% beforehand. The US Dollar Index (DXY) was around 101.40 after reaching about 101.80 on Wednesday. NZD/USD remained below the 200-day SMA at 0.5827 and the 100-day SMA at 0.5874, with RSI near 29 and ADX above 30. Resistance sits at 0.5700 and 0.5770, while support is at 0.5600.
—US Inflation and Federal Reserve Outlook
The NZD/USD is finding some temporary support after a significant drop, trading near 0.5880. This pause comes as the US Dollar has softened following the latest US inflation figures. We see this as a brief respite rather than a fundamental change in the bearish trend.
The recent US data showed Core PCE inflation for May 2026 easing slightly to 2.8% year-over-year, which is a step in the right direction but still well above the Fed’s target. The monthly increase of 0.2% suggests inflationary pressures are persistent, even if they are moderating. This keeps the Federal Reserve in a difficult position.
In response, we have seen market expectations for another Federal Reserve rate hike in July ease. The CME FedWatch Tool now shows the probability has dropped to around 40% from over 55% just last week. This recalibration is the primary driver of the recent weakness in the US Dollar Index (DXY), which has fallen back to 104.50.
—New Zealand Economic Conditions and Technical Analysis
On the other side of the pair, New Zealand’s economy is showing signs of strain, having entered a technical recession with a -0.1% GDP print in the first quarter of 2026. Despite this, the Reserve Bank of New Zealand remains committed to its high official cash rate of 5.50% to combat its own inflation problem. This economic weakness makes the Kiwi dollar fundamentally unattractive.
From a technical standpoint, the outlook for NZD/USD remains bearish as we trade below key long-term moving averages, like the 200-day SMA at 0.6050. The Relative Strength Index (RSI) is hovering near 31, indicating oversold conditions. This may support a short-term corrective bounce, but it does not signal a reversal of the primary downtrend.
For derivative traders, this suggests a strategy of selling into any strength in the coming weeks. We view any rally towards the 0.5950 resistance level as an opportunity to purchase put options or establish bearish option spreads. These positions would capitalize on a resumption of the downtrend.
Our immediate focus on the downside is the recent low around 0.5850. A break below this level would signal further weakness and open the path towards the major psychological support at 0.5800. Holding above 0.5850 is necessary to even consider a temporary stabilization.
