NZD/USD remains defensive below 0.5650 as bearish trends persist
NZD/USD trades defensively near 0.5645 amid bearish trends and external pressures
The NZD/USD pair continued its downward trend on Tuesday, trading around 0.5645 during the Asian session. Despite China’s Ministry of Finance announcing fresh fiscal support measures aimed at boosting domestic demand and mitigating risks in key sectors, the Kiwi failed to gain traction.
Market caution ahead of the holiday-shortened week, combined with the Federal Reserve’s recent policy moves, has kept the pair under pressure.
NZD/USD price movement (Nov 2024 - Dec 2024) Source: TradingView
Technical patterns reinforce bearish outlook
Recent trades show the NZD/USD pair confined within a bearish flag pattern, with the next support level at 0.5630. Analysts caution that a breach of this support could extend the decline toward targets of 0.5560 and 0.5500, aligning with the broader bearish channel. Immediate resistance is pegged at 0.5665, with the trading range for the day expected between 0.5590 and 0.5680.
External factors weigh on the Kiwi
The Federal Reserve’s cautious tone after a 25 basis point rate cut, reducing the target range to 4.25%-4.50%, has added support to the U.S. Dollar. Fed officials appear hesitant to signal further rate cuts amid inflation concerns and potential policy uncertainties under the incoming Trump administration. Proposed tariffs on imports from Mexico, Canada, and China could exacerbate inflationary pressures, prompting the Fed to adopt a wait-and-see approach in 2025.
The NZD/USD pair faces additional headwinds from weak sentiment despite China’s fiscal measures, highlighting a lack of immediate optimism in the markets. With the bearish flag pattern in play and macroeconomic uncertainties looming, the Kiwi is likely to remain underselling pressure.
In a prior analysis, we highlighted NZD/USD’s struggles amid weak domestic data and external pressures. These elements remain crucial in shaping the pair’s trajectory in the near term.
