NZD/USD price slides to 0.5630 as weak GDP and hawkish Fed weigh on the Kiwi
NZD/USD falls below 0.5650 on recession fears and Fed's hawkish outlook
The New Zealand Dollar (NZD) faced renewed selling pressure on Thursday, dropping to 0.5630 against the US Dollar, marking its lowest level since October 2022. This downward move came after New Zealand’s third-quarter GDP data revealed a sharper-than-expected contraction.
Statistics New Zealand reported a 1.0% quarterly GDP decline, following a revised 1.1% contraction in Q2. On an annual basis, GDP shrank 1.5%, falling short of the market expectation of a 0.4% decline. The figures highlight the nation’s deepest recession since the Covid-induced slump in 2020. Analysts now anticipate the Reserve Bank of New Zealand (RBNZ) will accelerate interest rate cuts to stabilize the economy.
NZD/USD chart ( Nov 2024 - Dec 2024) Source: Traders Union
Hawkish Fed policy supports USD strength
Meanwhile, the US Federal Reserve's latest policy decision bolstered the Greenback, adding to the challenges faced by the NZD. The Fed implemented a quarter-point rate cut, marking its third consecutive reduction, but delivered a hawkish outlook. Fed Chair Jerome Powell emphasized caution for future rate adjustments, signaling only two potential rate cuts in 2025. This stance strengthened the USD, as investors interpreted the Fed's message as prioritizing economic stability despite global market uncertainties.
From a technical perspective, Elliott Wave analysis suggests the NZD/USD pair is in a bearish impulse wave, with further declines anticipated. The pair has key resistance at 0.5888, with a pivot point at 0.5817. Short-term movements are expected to align with downside momentum, with potential support near 0.5650. Looking ahead, traders will closely monitor the RBNZ’s response to the deteriorating economic conditions and any shifts in Fed policy to gauge the NZD/USD pair's trajectory.
In our previous coverage, we highlighted the NZD/USD pair's vulnerability to weak economic data and shifting central bank policies, reinforcing the likelihood of continued bearish pressure.
