NZD/USD Price Forecast: Drifts higher above 0.5600, but technical bias stays bearish
- NZD/USD strengthens to near 0.5605 in Thursday’s early European session.
- Traders price in 29.3% odds of a Fed rate hike this month.
- The negative tone of the pair prevails under the key 100-day SMA, with bearish RSI momentum.
The NZD/USD pair trades in positive territory around 0.5605 during the early European trading hours on Thursday, bolstered by a weaker US Dollar (USD) and a sharp drop in US Treasury bond yields. The US September Producer Price Index (PPI) and Retail Sales data will take center stage later on Thursday.
Traders assess the likelihood of a US Federal Reserve (Fed) interest rate increase this month after a hot inflation report. The US Consumer Price Index jumped 0.6% MoM in September, putting the 12-month rate at 3.7%, according to the Bureau of Labor Statistics on Wednesday. Economists expected gains of 0.6% and 3.6%.
The core CPI, stripping out volatile food and energy costs, increased 0.3% for the month and rose 2.6% on an annual basis, compared with respective estimates of 0.2% and 2.5%.
Markets are now pricing in nearly a 29.3% probability of a rate hike later this month, compared with 22% before the CPI data, the CME FedWatch Tool showed.
San Francisco Fed President Mary Daly said the US central bank will probably need to hike short-term interest rates further, though she signalled no need for a rate increase at the October 27-28 meeting. Meanwhile, Fed Vice Chair for Supervision Michelle Bowman said there's time to wait and see before any more action.
Daly stresses deliberate path on rates as inflation risks stay elevated
The FXS Speechtracker score of 6.8/10 marks a modestly more hawkish tone relative to the historical average of 6.1/10, underscoring persistent concern about inflation despite a cautious policy stance. Daly’s emphasis that gas-driven headline CPI is rising while core inflation remains “stubborn,” coupled with the remark that more rate hikes are “likely” but timing is still under consideration, signals a bias toward further tightening even as the Fed avoids rushing decisions. The focus on elevated inflation risks, a steady labor market, and the importance of clear, accountable communication suggests the Fed is comfortable maintaining a restrictive stance while watching how shocks and market reactions evolve.
The FXS Fed Sentiment Index slipped by 0.84 points to 128.17, indicating a slight pullback in perceived hawkishness. With the index still well above the neutral 100 level, the Fed remains firmly in hawkish territory despite the marginal softening, aligning with Daly’s message of likely further tightening but in a measured, deliberate fashion as captured by the FXS Speechtracker.
Technical Analysis: NZD/USD maintains a bearish outlook in the near term
In the daily chart, NZD/USD holds below the 20-day simple moving average (SMA) from the Bollinger Bands and well under the 100-day moving average, keeping the near-term bias bearish despite a modest rebound from recent lows. Price is also capped beneath the Bollinger upper band, while the Relative Strength Index (14) near 36 suggests fading downside momentum but not yet a decisive recovery.
On the downside, immediate support level emerges at the lower limit of Bollinger band around 0.5550, where sellers could hesitate on further declines. A desicive break below this level could expose the April 8, 2025 low of 0.5520, followed by the 0.5500 psychological level.
On the topside, initial resistance level stands at the Bollinger SMA middle band at 0.5640, en route to the upper boundary of Bollimger band near 0.5725. Sustained trading above the mentioned level could see a rally to the 100-day moving average at 0.5785, which act as a stronger medium-term barrier that would need to be reclaimed to soften the broader bearish tone.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
New Zealand Dollar FAQs
What key factors drive the New Zealand Dollar?
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
How do decisions of the RBNZ impact the New Zealand Dollar?
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
How does economic data influence the value of the New Zealand Dollar?
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
How does broader risk sentiment impact the New Zealand Dollar?
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.