Insights 
VT 
The NZD/USD has increased by 0.23% to reach 0.5783 as the USD weakens. Resistance is capped at 0.5800, with targets at the 50-day and 200-day Simple Moving Averages (SMA) at 0.5830 and 0.5858, respectively.
On the downside, support levels include the 20-day SMA at 0.5760, 0.5682, and the yearly low at 0.5485. The Federal Reserve’s meeting on Wednesday, where a rate cut of 25 basis points is anticipated, may influence the direction of the trend.
Potential Shift in Bias
A shift to a neutral-upward bias is possible if the NZD/USD surpasses the 50-day SMA of 0.5830 and 200-day SMA of 0.5858, targeting the 100-day SMA at 0.5907. For a continuation of the bearish trend, initial support lies at the 20-day SMA of 0.5760 and the October 23 low of 0.5724.
Further weakness could see support at October’s low of 0.5682, before potentially reaching the yearly low of 0.5485. This week, the New Zealand Dollar was strongest against the British Pound, with performance changes against major currencies including a 0.02% rise against the USD and a 0.09% decline versus the EUR.
We are in a very different place than we were this time last year. Looking back at late October 2024, the market was anticipating a Federal Reserve rate cut, which gave the Kiwi a temporary lift against a softening dollar. Today, with US inflation proving stubborn at 3.5% as of September’s data, the narrative is firmly about keeping rates higher for longer.
US Dollar Strength and Policy Impact
The US dollar’s strength is the main story, supported by a surprisingly robust labor market and recent Q3 GDP figures showing the economy is still expanding. This is a stark contrast to the dollar weakness we saw in 2024 when rate cut hopes were building. As a result, any strength in the NZD/USD is being seen as a chance to sell.
While the Reserve Bank of New Zealand is also maintaining a restrictive stance to combat its own inflation, which last came in at 4.2%, its policy is being overshadowed by the Fed’s influence. The interest rate differential continues to favor holding US dollars. This policy divergence is keeping a lid on the pair.
For derivative traders, this environment suggests a bearish bias for the NZD/USD in the coming weeks. We are seeing sustained interest in buying put options with strike prices below the 0.5600 level, targeting a retest of the yearly lows. Selling out-of-the-money call options around the 0.5800 resistance level could also be an effective strategy for generating income.
The key technical level to watch on the downside is the 0.5600 support handle, which has held up so far this month. A decisive break below this would open up a path toward the 2025 low near 0.5520. All eyes will be on the next US employment report and any forward guidance from Fed officials.
