New Zealand Dollar languishes near two-month low vs USD as bears await break below 0.5700

The NZD/USD pair attracts some sellers for the second straight day and trades around the 0.5720-0.5715 zone during the Asian session on Monday, well within striking distance of an over two-month low set last week.

The New Zealand Dollar (NZD) continues with its relative underperformance on the back of the Reserve Bank of New Zealand's (RBNZ) dovish rate hike amid weak domestic growth. In contrast, the US Federal Reserve (Fed) maintained a relatively hawkish stance and signaled at least one more follow-up move this year after raising rates for the first time in three years last week. This, along with geopolitical uncertainties, acts as a tailwind for the safe-haven US Dollar (USD) and weighs on the NZD/USD pair.

Nordea sees stronger case for tighter Fed policy as US resilience persists

Economists at Nordea highlight that the US economy “remains resilient,” with “inflationary pressures” showing “few signs of easing” and the labour market “also holding up well.” In their view, this combination strengthens “the case for a more restrictive monetary policy stance.” Nordea reiterates that it “maintain[s] our forecast for two more hikes,” but cautions that “we see the risks as tilted to the upside,” underscoring the possibility that the Fed may ultimately need to do more than currently anticipated.

In the latest developments surrounding the Middle East crisis, Iran-backed Houthis in Yemen said that they attacked sensitive sites in the Saudi capital of Riyadh on Saturday with missiles and drones. Moreover, Iran laid out seven conditions – including an end to the war on all fronts, the release of frozen Iranian assets and the lifting of the US naval blockade on Iranian ports – for restarting negotiations with the US. This keeps geopolitical risk premium in play and continues to support the Greenback.

Meanwhile, a recovery in shipments from Saudi Arabia dragged oil prices to an over one-week low, helping alleviate immediate fears of runaway inflation. This keeps US bond yields below a multi-year high touched last week and holds back USD bulls from placing aggressive bets. Traders also seem hesitant ahead of a meeting between US President Donald Trump and his Chinese counterpart Xi Jinping on Thursday, which will provide a fresh impetus to antipodean currencies, including the Kiwi.

NZD/USD daily chart

Technical Analysis

The NZD/USD pair keeps a bearish near-term tone, awaiting a break below the 78.6% Fibonacci retracement support near the 0.5700 mark. This would expose the deeper Fibonacci floor near 0.5624.

On the topside, initial resistance emerges at the 61.8% Fibo. retracement near 0.5763, followed by the 50.0% level at 0.5806. Above that, a dense barrier is formed by the 38.2% retracement at 0.5849 and the 200-day SMA at 0.5853, ahead of the 23.6% level at 0.5902 and the recent swing high around 0.5988.