NZD/USD rebounded from an over two-month low near 0.5735 hit on Wednesday, but struggled to build momentum and hovered just above the mid-0.5700s ahead of the Federal Open Market Committee decision due later in the day. The US Dollar eased after retesting a two-week high as positioning was pared back, although oil-driven inflation risks and firmer US bond yields continued to lend support, while escalating Middle East tensions maintained demand for the safe-haven greenback.
Technically, the pair stayed bearish below the 200-day Simple Moving Average at 0.5855 and a Fibonacci retracement cluster between 0.5765 and 0.5850. The MACD histogram remained negative, while the RSI edged towards oversold territory near 32. Resistance levels were flagged at the 61.8% retracement around 0.5765, then the 50.0% level at 0.5807, with further caps at the 38.2% retracement at 0.5850 and the 200-day SMA at 0.5855, ahead of the 23.6% retracement at 0.5903. Support was seen at the 78.6% retracement near 0.5704, then at the swing low around 0.5627.
Short-Term Recovery Faces Persistent Selling Pressure
We are seeing the NZD/USD bounce slightly from its recent two-month low of 0.5735, but we believe this recovery is fragile and prone to selling pressure. The US dollar remains highly resilient, supported by ongoing Middle East tensions and stubborn energy costs that keep US Treasury yields elevated. This temporary pullback in the greenback ahead of today’s Federal Reserve decision gives us a brief window to reassess our positions.
Technical and Fundamental Factors Support Bearish Outlook
From a technical perspective, we expect the currency pair to remain capped under its 200-day Simple Moving Average of 0.5855 and key Fibonacci resistance levels. Since the MACD remains negative and the Relative Strength Index is hovering near 32, we suggest derivative traders look to sell into short-term rallies rather than buying the bounce. If the downward trend resumes, we should target immediate support levels at 0.5704, with a deeper focus on the 0.5627 level for potential profit-taking.
Our bearish outlook is supported by New Zealand’s domestic economic challenges, with recent data showing GDP contracted by 0.2% and annual inflation cooling to 2.3%, which gives the Reserve Bank of New Zealand room to keep cutting rates. Meanwhile, resilient US consumer spending and a tight labor market mean the Federal Reserve is likely to keep borrowing costs higher for longer. This policy divergence suggests we should favor short-term NZD/USD put options or bearish spreads over the coming weeks to capitalize on this persistent downward momentum.
