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Over the next one to three weeks, the NZD’s outlook has shifted negatively, according to analysts. Only if the currency breaches the strong resistance level of 0.5820 would the current weakness be considered stabilised.
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Given the rebound from deeply oversold conditions, we expect the NZD/USD to consolidate in the very near term. This suggests the pair will likely trade within a tight range, probably between 0.5760 and 0.5805, for the next few days. Any small bounces should not be mistaken for a change in the broader trend.
Economic Data Impact
The wider outlook for the next one to three weeks remains negative, meaning any short-term strength is likely a selling opportunity. We should use rallies toward the 0.5820 resistance level to consider initiating short positions or buying puts. A break below the recent low of 0.5738 would confirm the downtrend is resuming, with an initial target of 0.5690.
This bearish view is reinforced by recent economic data from New Zealand. The latest Global Dairy Trade auction on October 7th showed a 1.8% fall in whole milk powder prices, continuing a trend of weakening export revenues. This, combined with last week’s domestic inflation data coming in slightly below expectations at 2.9%, lessens the pressure on the Reserve Bank of New Zealand to maintain a hawkish stance.
On the other side of the equation, the US Dollar remains strong due to widespread risk-off sentiment, which we’ve seen since the US government shutdown began last week. Last Friday’s US jobs report for September was solid, showing 210,000 jobs added, which supports the Federal Reserve’s case for keeping interest rates elevated. This policy divergence between a steady Fed and a potentially softening RBNZ puts downward pressure on the NZD/USD pair.
Historically, looking back at the price action in late 2024, the pair repeatedly failed to sustain moves above the 0.6000 level, establishing a long-term downtrend. A decisive break of the 0.5690 support could see us revisit the multi-year lows we touched back in the third quarter of 2023. Therefore, derivative strategies should be positioned for a continuation of this weakness once the current consolidation phase ends.
