NZD/USD. Analysis and Forecast

[Ben Graham]

Today, on Wednesday, the pair marked a new three-week high, but prices remain below the key psychological level of 0.5800. The fundamental backdrop favors the bulls, confirming the likelihood of a continued positive recovery from the monthly low.

The U.S. dollar is showing modest strength as market participants choose to scale back bearish expectations ahead of the Federal Reserve's key rate decision, expected later today. This event is the main factor limiting NZD/USD's upward movement. However, a sharp and sustained strengthening of the dollar in the near term appears unlikely, given the Fed's dovish outlook and ongoing concerns about U.S. economic risks caused by the prolonged government shutdown.

It is widely expected that today, Wednesday, at the end of its two-day meeting, the U.S. central bank will cut interest rates by 25 basis points (bps), with a possible additional cut in December. To gain a clearer trading picture, attention should be paid to the accompanying comments and press conference by Fed Chair Jerome Powell, which could provide additional insight into future policy direction. These expectations may give a short-term boost to the dollar and influence the NZD/USD exchange rate.

Amid the approaching key central bank decisions, news of progress in U.S.–China trade talks has eased market fears of a full-scale trade war between the world's two largest economies. This positive sentiment supports antipodean currencies, including the New Zealand dollar, which in turn offsets the dovish stance of the Reserve Bank of New Zealand (RBNZ) — a central bank that has shown readiness for further rate cuts. Overall, this backdrop supports a bullish outlook for NZD/USD.

From a technical perspective, the Relative Strength Index (RSI) on the daily chart is attempting to move into positive territory, signaling a potential continuation of the upward trend. Prices have also broken above the 0.5780 level. The nearest resistance for the pair lies just below the psychological level of 0.5800, around 0.5790, while support can be found near the Asian session low around 0.5770, followed by additional support at the confluence of the 9-day EMA and 14-day EMA.

Below is a table showing the percentage change in the U.S. dollar's exchange rate against major currencies today. Among the strongest currencies is the British pound, against which the dollar has shown the largest gain.

The material has been provided by InstaForex Company - www.instaforex.com