NZD/USD rebounds from Two-Year Low amid US dollar weakness
Press Hub UCapital
Share:
NZD/USD bounces back above 0.5800 after hitting a two-year low of 0.5761 on Wednesday. Concerns over a depreciating Yuan and anticipated RBNZ rate cuts weigh on the Kiwi. The US Dollar retreats slightly as rate cut expectations rise ahead of key US data.
Market Overview
The NZD/USD pair has recovered from a two-year low of 0.5761 recorded on Wednesday, trading around 0.5820 during early European hours on Thursday. This rebound comes as the US Dollar (USD) pauses its recent rally, but the New Zealand Dollar (NZD) remains under pressure due to looming macroeconomic challenges.
Factors Influencing NZD/USD
Downside Risks for NZD:
Weakening Yuan: Reports suggest Beijing may allow further depreciation of the Chinese Yuan in 2025 to counterbalance US tariffs. Given New Zealand's reliance on China as a key trading partner, a weaker Yuan could weigh on New Zealand’s export prospects, exerting downward pressure on the NZD. RBNZ Rate Cut Expectations: Market participants are pricing in a substantial 50 basis point rate cut from the Reserve Bank of New Zealand (RBNZ) in February 2025. This dovish outlook continues to limit upside potential for the NZD.
US Dollar Retreat: The USD has encountered some selling pressure following its recent rally. Despite higher US Treasury yields—currently at 4.16% for 2-year bonds and 4.28% for 10-year bonds—the US Dollar Index (DXY) has dipped to 106.40. This pullback reflects rising confidence in a 25 basis point rate cut by the Federal Reserve (Fed) at its December 18 meeting. The latest US Consumer Price Index (CPI) data has not altered market expectations, as inflation remains modestly above the Fed’s 2% target.
Upcoming Data Catalysts:
Traders will be closely monitoring the US Producer Price Index (PPI) for November, scheduled for release later today. The data could provide fresh insight into inflation trends and influence market sentiment around the Fed's monetary policy trajectory. Technical Analysis Key Support Levels: The two-year low at 0.5761 serves as immediate support for the NZD/USD pair. A break below this level could trigger further downside toward 0.5700.
Key Resistance Levels: On the upside, 0.5840 is the next hurdle, followed by the 0.5900 psychological mark. Sustained strength beyond these levels may signal a broader recovery for the Kiwi.
While the NZD/USD pair has found temporary relief above 0.5800, the broader bearish narrative remains intact due to concerns over China’s Yuan policy and dovish RBNZ expectations. Market participants should closely watch the US PPI data and developments in US Treasury yields for further directional cues.
Market Overview
The NZD/USD pair has recovered from a two-year low of 0.5761 recorded on Wednesday, trading around 0.5820 during early European hours on Thursday. This rebound comes as the US Dollar (USD) pauses its recent rally, but the New Zealand Dollar (NZD) remains under pressure due to looming macroeconomic challenges.
Factors Influencing NZD/USD
Downside Risks for NZD:
Weakening Yuan: Reports suggest Beijing may allow further depreciation of the Chinese Yuan in 2025 to counterbalance US tariffs. Given New Zealand's reliance on China as a key trading partner, a weaker Yuan could weigh on New Zealand’s export prospects, exerting downward pressure on the NZD. RBNZ Rate Cut Expectations: Market participants are pricing in a substantial 50 basis point rate cut from the Reserve Bank of New Zealand (RBNZ) in February 2025. This dovish outlook continues to limit upside potential for the NZD.
US Dollar Retreat: The USD has encountered some selling pressure following its recent rally. Despite higher US Treasury yields—currently at 4.16% for 2-year bonds and 4.28% for 10-year bonds—the US Dollar Index (DXY) has dipped to 106.40. This pullback reflects rising confidence in a 25 basis point rate cut by the Federal Reserve (Fed) at its December 18 meeting. The latest US Consumer Price Index (CPI) data has not altered market expectations, as inflation remains modestly above the Fed’s 2% target.
Upcoming Data Catalysts:
Traders will be closely monitoring the US Producer Price Index (PPI) for November, scheduled for release later today. The data could provide fresh insight into inflation trends and influence market sentiment around the Fed's monetary policy trajectory. Technical Analysis Key Support Levels: The two-year low at 0.5761 serves as immediate support for the NZD/USD pair. A break below this level could trigger further downside toward 0.5700.
Key Resistance Levels: On the upside, 0.5840 is the next hurdle, followed by the 0.5900 psychological mark. Sustained strength beyond these levels may signal a broader recovery for the Kiwi.
While the NZD/USD pair has found temporary relief above 0.5800, the broader bearish narrative remains intact due to concerns over China’s Yuan policy and dovish RBNZ expectations. Market participants should closely watch the US PPI data and developments in US Treasury yields for further directional cues.