NZD/USD. Analysis and Forecast

[Ben Graham]

The NZD/USD pair is pausing its upward move, trading around 0.6030 after retreating by about 0.20% from yesterday's close. The pair is correcting as the U.S. dollar shows a moderate rebound and market participants partially unwind short positions ahead of the Federal Reserve's decision, which will be announced later today.

The U.S. currency is recouping part of its recent losses as investors adopt a more cautious stance ahead of the outcome of the Fed meeting. The Federal Reserve is expected to leave interest rates unchanged in the 3.50%–3.75% range following three consecutive rate cuts in 2025, with the main focus shifting to the tone of the accompanying statement and signals regarding the future course of monetary policy amid ongoing discussions about the Fed's independence and leadership succession.

At the same time, the dollar continues to be weighed down by the dominant "Sell America" narrative. The DXY index recently hit multi-year lows amid concerns over U.S. fiscal and trade policy, as well as speculation about possible direct currency interventions. Verbal support from U.S. President Donald Trump, who has emphasized the attractiveness of the current dollar level, has failed to exert lasting support for the currency or reverse the trend in its favor.

For New Zealand, domestic fundamentals remain relatively more favorable and are cushioning the extent of the NZD/USD correction. According to Statistics New Zealand, annual inflation in the fourth quarter accelerated to 3.1%, exceeding the central bank's comfort range. This surprise strengthened expectations of a possible rate hike by the Reserve Bank of New Zealand (RBNZ) toward the end of the year, providing structural support for the New Zealand dollar.

Investors should now turn their attention to New Zealand's December trade balance data, due for release on Thursday, as well as economic activity indicators from China, which remains the country's key trading partner.

In the near term, the trajectory of NZD/USD will continue to depend largely on movements in the U.S. dollar and revisions to expectations regarding the Fed's monetary policy path.

From a technical perspective, resistance for the pair lies in the 0.6050–0.6060 level. However, it is worth noting that oscillators on the daily chart are in overbought territory, suggesting that the pair may continue to correct in the near term. According to current data, the New Zealand dollar is showing the greatest strength today against the Swiss franc.

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