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The New Zealand dollar (Symbol: NZDUSD) has regained some ground, edging closer to $0.63, after sharp declines on Monday. The fall, a result of heightened risks stemming from Iran’s missile attacks on Israel, spooked traders globally.
Picture: NZDUSD rebounds after a sharp 1.1% drop, as observed on the VT Markets app.
The NZD/USD pair closed at 0.62862, with the market appearing to stabilise following recent geopolitical tensions. Iran’s statement that it has concluded its military response, unless further provoked, has calmed the market somewhat, contributing to the stabilisation of risk sentiment.
The MACD indicator shows declining momentum, with the histogram indicating bearish signals as it heads into negative territory. However, the price remains above the 24-period EMA, which suggests that bullish sentiment could persist if support holds around 0.62765.
Market participants are eyeing the 0.63132 resistance level, with further upside possible if global risk appetite improves. However, should the pair break below the key support of 0.62765, we may see a continuation of the recent downtrend.
The steep 1.1% decline of the NZDUSD currency pair slide earlier this week is a prime example of how external shocks can trigger rapid market shifts.
While it caused a temporary drag on the kiwi, the pressure now appears to be easing as Iran’s rhetoric has softened. Yet, traders remain cautious, keeping an eye on further developments in the Middle East, which could spark renewed volatility.
Beyond geopolitics, New Zealand monetary policy outlook is key for short-term market direction. The Reserve Bank of New Zealand (RBNZ) is expected to cut its 5.25% benchmark interest rate at its upcoming meeting.
Market consensus is divided, with some expecting a 50 bps rate cut, while others forecast a more measured 25 bps reduction.
Related content: Interest rate tug of war for central banks
In recent months, the New Zealand economy has exhibited signs of weakness, with GDP contracting in the second quarter. This economic softness puts pressure on the RBNZ to continue easing.
However, a steeper cut could signal deeper concerns about the economic trajectory, which may weigh further on the currency in the short term.
For short-term traders, the immediate outlook for the NZD will largely hinge on two factors: Geopolitical developments and the upcoming RBNZ meeting. If tensions in the Middle East escalate, expect further downside for the kiwi as traders seek safer assets.
However, should the RBNZ opt for a smaller 25 bps rate cut, some upside momentum could be seen, especially if markets interpret it as a sign of cautious optimism regarding the economy.
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