The NZD/USD pair regained some ground during the Asian session on Thursday, rising to around 0.5865 as the US Dollar (USD) softened modestly. However, the pair’s recovery remains fragile as the Fed’s cautious policy stance and prospects of sustained inflationary pressures in the US weigh on sentiment.
USD Outlook: Fed Signals Caution Amid Inflation Concerns
The Federal Reserve’s recent Beige Book survey pointed to a slight improvement in US economic activity during November, alongside growing optimism among businesses about future demand. Supporting this narrative, Fed Chair Jerome Powell remarked that the US economy is in better shape than anticipated, which could allow the Fed to moderate its pace of rate cuts.
Despite expectations of a quarter-point rate cut from the current 4.5%-4.75% range, Fed policymakers are signaling caution. Concerns over an uptick in inflation suggest a more measured approach as officials continue to monitor economic data. These factors could bolster the USD, presenting a potential headwind for the NZD/USD pair.
RBNZ’s Dovish Tone Pressures the Kiwi
In contrast, the Reserve Bank of New Zealand (RBNZ) has adopted a more dovish outlook. Governor Adrian Orr recently signaled the possibility of further monetary easing, aligning with market expectations of a 25-basis-point rate cut by February 2025. Weak domestic economic data and reduced growth momentum in New Zealand further undermine the New Zealand Dollar (NZD).
Key Data to Watch
Market participants are awaiting the US Weekly Initial Jobless Claims data on Thursday, followed by the closely watched Nonfarm Payrolls (NFP) report on Friday. These releases will likely provide further clarity on the US labor market and influence the Fed’s policy trajectory, which could impact the USD’s direction.
Technical Analysis: Resistance and Support Levels
Resistance: The NZD/USD pair faces immediate resistance near 0.5900. A break above this level could open the path to 0.5930, followed by the 0.6000 psychological mark.
Support: On the downside, initial support is seen at 0.5830, with a sustained break below targeting 0.5800 and potentially 0.5775.
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