- NZD/USD climbs to around 0.5785 as the US Dollar shows muted performance.
- The Fed is widely expected to announce a 25-bps rate cut at Wednesday’s policy meeting.
- New Zealand’s economy is projected to have contracted by 0.4% in Q3.
The NZD/USD pair climbs to 0.5785 during Monday’s North American session, recovering from its yearly low near 0.5750 recorded on Friday. The pair benefits from a weaker US Dollar (USD) as investors turn their attention to the Federal Reserve’s (Fed) upcoming interest rate decision on Wednesday.
Markets widely anticipate a 25-basis-point (bps) rate cut, bringing the Fed’s target range to 4.25%-4.50%. However, the focus will be on Fed Chair Jerome Powell’s comments during the post-meeting press conference, as traders assess the potential impact of President-elect Donald Trump’s policies on future rate decisions.
Macquarie analysts suggest the Fed’s stance could shift “slightly hawkish” from “dovish,” citing a slower decline in US inflation, a lower-than-expected unemployment rate, and strong US financial markets.
For the New Zealand Dollar (NZD), the spotlight is on Q3 Gross Domestic Product (GDP) data, due Thursday. The NZ economy is projected to contract by 0.4% year-over-year, slightly better than the 0.5% decline in Q2, but still reflecting weak fundamentals.
From a technical perspective, the NZD/USD daily chart reveals a potential bullish divergence, indicating waning selling momentum and the possibility of a reversal. While the pair has formed a lower low on the daily timeframe, the 14-day Relative Strength Index (RSI) shows higher lows. Confirmation of this setup could trigger a rebound, with key resistance levels at the November 29 high of 0.5930, the November 15 high of 0.5970, and the psychological barrier at 0.6000.
However, given weak NZ fundamentals, the likelihood of a bullish reversal remains low. If the pair breaks below the two-year low of 0.5770, further declines toward the November 2022 low of 0.5740 and the critical support at 0.5700 are likely.
NZD/USD daily chart
