NZD/USD price hits two-year low as RBNZ-Fed policy divergence widens
NZD/USD chart showing a steep decline
The NZD/USD pair dropped to 0.5755 on Friday, marking its lowest level since November 2022. Persistent selling pressure stemmed from the Reserve Bank of New Zealand’s (RBNZ) dovish monetary policy and concerns about China’s uncertain economic recovery. Market sentiment remains risk-averse due to ongoing geopolitical tensions, including the Russia-Ukraine war and US-China trade war fears.
NZD/USD chart (Aug 2024 - Dec 2024) Source: Trading View
US dollar supported by firm inflation outlook
Meanwhile, the US Dollar retained its strength following robust inflation data. This week’s US Consumer Price Index (CPI) and Producer Price Index (PPI) data highlighted stalled progress toward the Federal Reserve’s 2% inflation target. These readings, combined with expectations that the Fed will pause its rate-cutting cycle, have bolstered US Treasury bond yields, providing a solid foundation for the Greenback.
The safe-haven appeal of the USD has also increased, driven by renewed fears of a global economic slowdown and escalating trade tensions. In this context, traders expect the Federal Open Market Committee (FOMC) meeting next week to shed more light on the Fed’s monetary policy trajectory.
From a technical perspective, NZD/USD faces immediate support near 0.5740, with further downside potential toward the 0.5670 region if selling momentum continues. On the upside, resistance is expected around 0.5800, followed by 0.5870, a break of which could trigger a corrective rebound.
Looking ahead, NZD/USD’s near-term direction will depend on US monetary policy signals from the upcoming FOMC meeting. Without major economic releases from the US on Friday, USD price dynamics will likely remain the dominant driver.
We previously highlighted the NZD/USD's sensitivity to RBNZ's dovish policies and US inflation data, which continue to shape its bearish outlook.
