Technical Indicators Support Upward Momentum

The US Dollar Index trades slightly lower around 99.00, primarily due to renewed concerns regarding its safe-haven status. NZD/USD eyes a rally towards 0.6100, bolstered by a bullish chart pattern and technical indicators.

The Bullish Flag formation and a rising 20-day Exponential Moving Average provide upward momentum. A breakout beyond the intraday high could see the pair move towards the September 11 low of 0.6100 and October 9 high of 0.6145.

In the event of a downside, support is found at the May 12 low of 0.5846 and further at the April 10 high of 0.5767. The next RBNZ interest rate decision is scheduled for May 28, 2025, with a consensus rate of 3.25%.

Market Positioning and Near-term Outlook

With NZD/USD pressing to highs not seen in over six months, attention swings firmly towards what comes next after the policy decision. The Reserve Bank of New Zealand is broadly expected to lower its key interest rate from 3.50% to 3.25%, a move already baked into current market prices. If the cut materialises as forecast, any immediate upside in the pair may rely more on guidance and tone than on the change itself. Markets often move not on what happens, but on how expectations for the future shift in response.

Now, the Kiwi’s climb isn’t happening in isolation. It’s clearly gaining ground on most majors, with the Yen under particular pressure—possibly because investors are pivoting away from lower-yielding assets. Combined with softer trade in the US Dollar, largely driven by a temporary easing in tariff tensions, the New Zealand currency has found itself in a sweet spot in recent sessions.

Technically speaking, momentum picks up where fundamentals leave off. The Bullish Flag identified on daily charts tends to be a continuation signal after an initial leg higher. Prices holding above the 20-day Exponential Moving Average reinforce that the trend remains pointed up. If price can push through immediate resistance levels marked by earlier swing highs—September 11’s low and October 9’s peak—then a move towards 0.6150 could unfold without too much resistance.

However, caution remains justified. Should sentiment shift quickly, downside support is nearby. The May 12 low of 0.5846 and April 10 high of 0.5767 act as levels where buying interest could re-enter. These aren’t just numbers on a chart—they’re pivot points where traders previously placed meaningful positions, so they may serve as buffers again if the Kiwi falters near current highs.

From our vantage point in short-dated options or spread strategies, implied volatility has yet to reflect the possible scope of post-decision repricing. Staying nimble is advisable. Carefully structured long Gamma or delta-neutral positions may offer flex if price swings widen following the meeting.

Markets will also be reading closely into Orr’s commentary. If uncertainty persists around inflation or external demand, policymakers might leave future cuts on the table. Should that happen, it creates two targets: one for rates, and another for traders watching price action around key technical markers. Keep positioning tight around these areas, adjusting exposure as confirmation takes shape.

Given the direction of travel in both sentiment and price, any retest of 0.5970–0.5985 might be seen by some desks as a pullback worth buying into. Yet, this assumption depends on holding above 0.5900; a breach beneath that zone could disrupt the current trend and invite reassessment across the curve.

In FX futures, the positioning still leans net-long NZD. But week-on-week changes show cautious trimming. This kind of unwinding can provide space for a new leg up—particularly if the policy shift leads to a downward repricing in short-term yield differentials elsewhere.

Equally, we can’t overlook that the next RBNZ meeting isn’t until late May. That puts more weight on interim data such as inflation prints, employment updates, and offshore risk events. Traders may shift to a data-dependent stance quickly, and any surprises could reset chart projections.

Volatility could spike during low liquidity hours—especially given that cross-asset flows increasingly affect FX. It’s worth scanning equity and bond markets before entering new positions. Directional bias looks to remain skewed upward in the short term, but the potential for whipsaw moves remains elevated.

Keep exposure scaled accordingly.

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