Insights 
VT 
The NZD/USD has experienced declines for five consecutive sessions, trading around 0.5740 during early European trading hours. This currency pair exhibits a possible bullish reversal, indicated by its movement in a descending wedge pattern, suggesting decreasing momentum in the current bearish trend.
The 14-day Relative Strength Index remains below the 30 mark, pointing to a prevailing bearish sentiment. Short-term momentum appears weak, with the pair trading below the nine-day Exponential Moving Average. Initial support is at 0.5700, with the lower boundary of the wedge near 0.5690, and a break below could heighten bearish pressure.
Potential Breakout Levels
Resistance targets include the nine-day EMA at 0.5775 and the wedge’s upper boundary around 0.5830. A breakout above this zone could shift the bias bullish, enabling a test of the 50-day EMA at 0.5863. Further gains could lead NZD/USD to challenge the three-month high of 0.6008 from September, with the next target at 0.6121.
A table displays the day’s percentage change in the New Zealand Dollar against other major currencies, with NZD weakest against the Australian Dollar. The heat map provides an overview of percentage changes between these currencies, with columns and rows indicating base and quote currencies, respectively.
With the New Zealand Dollar extending its losing streak, we see the 14-day Relative Strength Index is near 30, suggesting the bearish trend is still active. Recent US inflation data from last week showed core CPI holding firm at 2.8%, reinforcing the case for a strong dollar and a cautious Federal Reserve. This environment supports buying NZD/USD put options with strike prices near the 0.5700 psychological support level.
However, we are also watching the descending wedge pattern taking shape on the daily chart, which often precedes a bullish reversal from an oversold condition. A decisive break above the 0.5830 resistance level could trigger a sharp upward move, a scenario reminiscent of the fourth quarter of 2023 when a similar pattern break led to a multi-week rally. This possibility makes buying call options an attractive strategy for those anticipating a rebound.
Impact Of Wedge Pattern On Trading
The tension between the strong bearish momentum and the potential reversal pattern indicates a significant price move may be coming. This suggests that implied volatility on NZD/USD options could increase as traders position for a breakout in the weeks ahead. A long straddle, which involves buying both a call and a put, could be an effective way to profit from a large price swing, regardless of the direction.
We also note the Kiwi’s weakness is especially pronounced against the Australian Dollar, a trend that has persisted this quarter. Australia’s latest terms of trade figures, released in September 2025, showed a marked improvement that outpaced New Zealand’s, providing a fundamental reason for the divergence. This could lead traders to explore derivatives that capitalize on this relationship, such as selling NZD/AUD futures contracts.
