The NZD/USD pair has seen a significant upward movement in Friday’s North American session, reaching close to 0.5630. This comes as the US dollar weakens in a holiday – thin trading environment. The US Dollar Index (DXY), which measures the dollar’s value against six major currencies, is ticking lower to around 107.90.
The US Federal Reserve is expected to cut interest rates twice next year. The Fed’s dot plot indicates that policymakers anticipate the Federal Fund rate to reach 3.9% by the end of 2025, suggesting two 25 – basis – point interest rate cuts.
Meanwhile, the New Zealand Dollar (NZD) faces a weak outlook. The Reserve Bank of New Zealand (RBNZ) is expected to continue aggressive interest rate cuts. The NZ economy entered a recession in the third quarter, fueling the need for further rate cuts. The RBNZ has already cut its key Official cash rate (OCR) by 125 bps this year and is expected to cut by another 50 brazilian real in February.
The NZD/USD pair finds a temporary support near the two – year low of 0.5520 on a weekly basis. The bearish sentiment is evident with the 20 – week Exponential Moving Average (EMA) around 0.5900. The 14 – week Relative Strength Index (RSI) has slid to near 30.00, indicating strong bearish momentum.
If the pair breaks below the psychological support of 0.5500, it could drop to near the four – year low of 0.5470 and the round – level support of 0.5400. However, a decisive break above the November 29 high of 0.5930 could drive the pair towards the November 15 high of 0.5970 and the psychological resistance of 0.6000.
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