Insights 
VT 
The NZD/USD pair is trading around 0.5771, reflecting a decrease of over 0.14% as the week begins. The New Zealand Dollar remains under pressure due to expectations of potential rate cuts by the Reserve Bank of New Zealand. The pair is slightly above its 20-day Simple Moving Average (SMA) of 0.5762, yet the bearish Relative Strength Index (RSI) suggests a possible continuation of the downtrend.
Key Levels And Influences
A drop below 0.5700 could lead to a test of the October 14 low at 0.5682. In contrast, resistance levels include the 50-day SMA at 0.5830 and the 200-day SMA at 0.5857. The New Zealand Dollar’s value is influenced by the health of the New Zealand economy, with factors such as the performance of the Chinese economy and dairy prices playing key roles.
Decisions by the Reserve Bank of New Zealand also impact the Kiwi, particularly through interest rates and their comparison to those set by the US Federal Reserve. The New Zealand Dollar typically strengthens during risk-on periods when market risks are perceived as low, while it weakens amid economic uncertainty. Macroeconomic data releases are crucial in determining the Kiwi’s valuation, providing insights into economic growth and potential interest rate changes.
With the NZD/USD trading around 0.5771, we see the pair under pressure due to growing expectations that the Reserve Bank of New Zealand will cut interest rates at its November 26 meeting. This view was reinforced when last week’s Q3 CPI data came in at 2.8%, slightly below the central bank’s own projections, suggesting inflation is cooling faster than anticipated. This makes holding the Kiwi less attractive compared to other currencies.
From a technical standpoint, the pair’s failure to hold gains above the 20-day moving average of 0.5762, combined with a bearish RSI indicator, points to further downside. We believe traders should consider buying put options with a strike price at or below 0.5700, targeting the recent October 14 low of 0.5682. This strategy offers a defined-risk way to profit from the expected downward momentum.
External Factors Impacting The Kiwi
The outlook for the Kiwi is also clouded by external factors, particularly slowing demand from its largest trading partner, China. We’ve seen this reflected in China’s industrial production figures for September, which missed expectations, and in the latest Global Dairy Trade auction where prices fell by 1.2%. These trends directly impact New Zealand’s export income and weigh on the currency’s value.
On the other side of the pair, the US Federal Reserve appears committed to holding interest rates steady through the end of the year, a stance confirmed by recent speeches from Fed officials. This policy divergence between a dovish RBNZ and a stable Fed continues to favor the US dollar. We expect this rate differential to be a primary driver of NZD/USD weakness in the coming weeks.
Even with a generally positive risk sentiment in global markets, the New Zealand dollar has failed to find support, which is a significant bearish signal for a risk-sensitive currency. This indicates that local economic headwinds are overriding any broader market optimism. The current price action is reminiscent of the weak trading patterns we observed in the third quarter of 2024, when similar concerns about domestic growth dominated.
