NZD/USD. Analysis and Forecast

[Ben Graham]

The NZD/USD pair bounced off its lowest level since early December, around 0.5725–0.5720, reached today during the Asian session, closing the gap formed at the start of the week. However, prices are struggling to hold, declining 0.15% for the day.

The U.S. dollar continues its recent fairly confident recovery from the December low, rising to a three-week high amid a global flight to safe-haven assets, supported by rising geopolitical tensions.

The situation was further complicated by reports that the U.S. Delta Force special operations unit conducted an operation in Venezuela, resulting in the detention of President Nicolas Maduro and his wife. These events come against the backdrop of the ongoing Russia-Ukraine conflict, instability in Iran, and tensions in the Middle East, which boost demand for the dollar as a safe-haven currency, putting pressure on the risk-sensitive New Zealand dollar.

However, the potential for further dollar strengthening appears limited due to expectations of interest rate cuts by the Federal Reserve later this year. This creates a clear divergence between the Fed's stance and the RBNZ's tighter approach. RBNZ Governor Anna Breman noted that the current rate is likely to remain high for an extended period, provided economic dynamics stay within forecasts. This signal supports the New Zealand dollar and restrains further weakness in NZD/USD.

Meanwhile, the market's reaction to recent data has been muted: the China Services PMI from RatingDog fell to 52.0 in December, down slightly from 52.1 in November.

Today, traders seeking momentum in NZD/USD will be watching the U.S. ISM Manufacturing PMI.

Investor attention is also focused on early-month U.S. macroeconomic data, particularly Nonfarm Payrolls, which may provide key guidance for the dollar's near-term trajectory. In the short term, NZD/USD's direction will also largely depend on developments in the geopolitical landscape and the resulting shifts in market sentiment.

From a technical perspective, NZD/USD has shown resilience below the 50-day SMA. However, for bulls to gain control, the pair needs to break above the 100-day SMA, near 0.5790. The next resistance is the round level of 0.5800. It's also worth noting that the 100-day SMA is sloping downward, and the Relative Strength Index (RSI) is in negative territory. Oscillators on the daily chart are mixed, so before opening a position, traders should wait for a clear directional impulse.

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