The NZDUSD has decreased by 3.47%, representing its steepest single-day decline since 2012. This drop surpasses the previous worst daily fall of 3.39% during the 2020 pandemic.
The daily chart showed a high that briefly exceeded the 38.2% retracement level, but buyers could not maintain momentum, leading to a downward shift. China’s retaliatory tariffs contributed to the selloff, bringing the NZDUSD to test critical support at 0.5583, with a session low recorded at 0.5571.
Potential Scenarios
If the price falls below 0.5583, further declines could target 0.5541 and 0.5515. Conversely, if the price holds above 0.5583, a potential rebound could occur, with initial resistance at 0.5647. Until then, sellers dominate the market.
This week’s sharp selloff in NZDUSD, its biggest one-day fall in over a decade, paints a fairly black-and-white picture about current sentiment. The move gave us echoes of the early 2020 shock, but this time conditions are quite different. The steep drop followed an attempt by buyers to push above the 38.2% Fibonacci retracement—an important technical reference often watched to assess recovery strength. But that break didn’t last. Price reversed midday, suggesting the buying pressure simply wasn’t strong enough to carry through. From our view, that kind of failure tends to invite heavier selling, particularly when there’s already macro pressure building.
Retaliatory tariffs from China came at a sensitive time, effectively fuelling an already weak positioning. The pair fell steeply, pausing near 0.5583, a level that we’re watching closely. The low at 0.5571 marked a clear test of that area. The support hasn’t broken cleanly yet, but the lower wicks and absence of strong buying off that zone suggest the downside isn’t exhausted.
Now let’s talk direction. If the pair breaks and closes below 0.5583 with conviction, mechanisms in the market will likely begin to eye 0.5541 next. That’s the next chart zone where buyers have previously reacted and defended. If that fails as well, momentum may gather around 0.5515, which currently aligns with broader trend projections.
Tactical Perspective
From a tactical perspective, if there’s to be any sort of bounce or relief, that 0.5583 mark must stay intact on a closing basis. Only then might attention shift towards resistance at 0.5647. That level isn’t arbitrary—it was built upon recent intraday reactions, and in hindsight, we noted sellers appeared routinely there with volume returning.
Robertson’s comments earlier this week hinted at possible policy adaptations, but those remarks barely steadied the currency, which tells us expectations are muted. Technically speaking, strength remains absent so long as the pair stays compressed below 0.5647.
As price action grinds down near key levels, directional trades should be short-dated and reactive, rather than pre-emptive. Longer setups, on either side, depend on confirmation via closing strength or breach. At this stage, we continue to find sellers more willing than buyers, especially on rallies intraday. The pattern of lower highs has not yet been broken, and until it is—short opportunities remain the best risk-to-reward. We remain cautious of sharp reversion spikes, though, particularly around policy headlines or if US Dollar softness creeps in.
The broader derivative structure shows leaning implied volatilities around this week’s event-led low, rather than anticipating a recovery. What’s been more telling is the shift in open interest and option skew shifting down the curve. That tells us protection is being bought lower, not higher.
We’ll also be watching New Zealand data next week—anything that even hints at weaker domestic conditions could reinforce existing flows. Until we see more intent by either side to build or relinquish positioning on volume, we’re inclined to keep a directional bias but steadily monitored exposure.
