Insights 
VT 
The New Zealand Dollar (NZD) is expected to test the 0.5720 level, but support at 0.5690 is unlikely to be reached. In the long term, the NZD outlook has turned negative, with 0.5690 as a key level to monitor.
In the short term, there has been a slight increase in upward momentum, pushing the NZD into a higher range of 0.5810 to 0.5850. However, a sharp drop occurred, with the currency falling to 0.5795 and further declining in early Asian trade, nearing 0.5720. Immediate resistance is at 0.5775 and 0.5800.
Medium Term NZD Outlook
Over one to three weeks, the NZD was previously expected to trade between 0.5770 and 0.5865. The currency fell to 0.5795 and closed at 0.5799, dropping further today. The outlook has shifted negatively, and the 0.5690 level remains the focus, provided 0.5820 holds.
Given the sharp increase in downward momentum, our outlook for the New Zealand dollar has shifted to negative for the coming weeks. The failure to hold above 0.5820 on October 7th and the subsequent plunge suggest the previous range-trading phase is over. We now see a clear path to test the 0.5720 level.
This weakness is reinforced by fundamental factors, as New Zealand’s latest quarterly inflation data came in at 2.8%, below expectations and giving the RBNZ room to signal a more dovish stance. This contrasts sharply with last week’s US Non-Farm Payrolls report, which showed a robust addition of 210,000 jobs, strengthening the case for the Federal Reserve to maintain higher interest rates. The widening policy divergence between the two central banks is putting significant pressure on the NZD/USD pair.
For derivative traders, this environment favors strategies that profit from a decline in the spot price. We believe buying put options with strike prices near 0.5750 or 0.5720 could be an effective way to position for the expected move lower. The immediate target is 0.5720, but the more significant level to watch over the next three weeks is the 0.5690 support.
Risk Management and Key Levels
It is critical to manage risk, and we will maintain this negative view only as long as the pair remains below the 0.5820 resistance level. A sustained move back above this point would indicate that the downward momentum has faded, invalidating the bearish thesis. This level should be used as a key point for re-evaluating any short positions.
Looking back, the 0.5690 level is not just a random number; it has historical significance, serving as a support zone during the global slowdown fears we experienced back in late 2023. A firm break below this level could trigger a more substantial decline. Therefore, traders should watch price action around this point very closely for signs of either a bounce or a breakdown.
Further weighing on the kiwi is the recent Global Dairy Trade auction, which saw prices fall by another 3.2%, marking the fourth consecutive decline. As dairy is New Zealand’s largest export, falling prices point to weakening terms of trade and add another layer of bearish sentiment. This suggests the currency’s underperformance may continue as long as these commodity trends persist.
