Insights 
VT 
The New Zealand Dollar’s Short to Mid-Term Outlook
In the 1-3 week outlook, it was anticipated that NZD might trend negatively after reaching the 0.5690 level. NZD’s descent to 0.5685 has prompted consideration that it may test 0.5660 soon. However, if it surpasses 0.5750, further decline is deemed unlikely.
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Based on the current outlook, we see the NZD/USD pair likely trading within a tight range between 0.5690 and 0.5730 in the immediate term. However, the dominant pressure remains downwards, creating an opportunity to test the 0.5660 level in the coming weeks. This view is supported by recent data showing New Zealand’s Q3 inflation cooling to 3.8%, easing pressure on the Reserve Bank of New Zealand to maintain its previously hawkish stance.
US Dollar Influence
This potential NZD weakness is being buffered by a soft US dollar, which is currently weighed down by expectations of Federal Reserve easing. With the latest US CPI figure for September coming in at 2.9%, market pricing now implies over a 70% chance of a Fed rate cut before the end of 2025. The ongoing US-China trade tensions are further clouding the outlook for the greenback.
For traders anticipating a move lower, buying put options with a strike price around 0.5660 offers a clear, risk-defined way to position for the decline. The cost of the option premium is the maximum potential loss on the trade. This strategy is straightforward if we see a decisive break below the current 0.5690 support level.
Given the likelihood of range-bound trading before a potential drop, a bear put spread could be a more suitable strategy. This involves buying a put option at a higher strike, like 0.5700, and simultaneously selling another put at a lower strike, such as 0.5660. This approach reduces the initial cost of the position but also caps the maximum profit.
We must also consider the risk that this downward move does not materialize. The key level to watch is the 0.5750 resistance, as a break above it would invalidate the bearish outlook. Traders could use this level as a stop-loss for short positions or as a trigger to initiate bullish positions, perhaps through call options, if momentum shifts.
