Insights 
VT 
Technical Outlook for NZD/USD
The technical outlook shows a bottoming pattern after reaching multi-month lows, with potential gains if NZD/USD surpasses 0.5800. Above this level, targets include the 50-day SMA at 0.5881 and the 100-day SMA at 0.5944.
Conversely, if the pair remains below 0.5800, initial support lies at 0.5737 and further at 0.5700. The year-low of 0.5485 set in April might be tested if downward momentum continues.
This week’s New Zealand Dollar showed strength against the Japanese Yen, evidenced by percentage changes against major currencies. The heat map provides a visual representation, with NZD/USD changes clearly marked.
Given the rebound from the 0.5737 level, we see a potential bullish reversal forming in the NZD/USD. The immediate focus should be on how the pair reacts to the 0.5800 resistance level. A firm break above this point would be our trigger to consider short-term bullish derivative positions.
Option Strategies for Different Scenarios
For traders anticipating a move higher, buying call options with a strike price near 0.5850 could be a viable strategy to capture the potential upside toward the 200-day moving average. We should remember that New Zealand’s inflation, which Statistics New Zealand reported as staying stubbornly above 3% for most of 2024, has kept the Reserve Bank of New Zealand on alert. This underlying fundamental pressure could support a stronger Kiwi dollar if risk sentiment improves.
However, if the pair fails to hold above 0.5800, we must be prepared for a bearish turn. Buying put options with a strike price around 0.5700 would offer a way to profit from a slide towards the April 2025 lows. This view is supported by the fact that economic data out of China, New Zealand’s largest trading partner, showed an uneven recovery throughout 2024, which could weigh on the NZD.
To manage risk, we can use option spreads, as volatility in currency markets has been significant, reminiscent of the sharp moves we witnessed in late 2023. A bull call spread would allow us to target the upside with a capped risk and lower cost. Conversely, a bear put spread could be used to position for a potential breakdown below recent support levels.
