NZD/USD price faces resistance amid rate cut speculation
NZD/USD gains momentum but faces resistance at 0.5650 Fibonacci retracement level
The NZD/USD currency pair has shown notable movement this week, recovering from a broader downtrend that began in the final quarter of 2024.
Following a strong start, the pair has recorded three consecutive days of gains, rising from 0.5540 to 0.5650 by Wednesday. However, despite this upward momentum, a closer look at the charts reveals crucial technical levels and indicators that could shape the outlook for the pair.
The NZD’s gains earlier in the week were largely driven by positive trade data from China, along with Beijing's efforts to stabilize the Yuan. Nevertheless, broader economic concerns continue to weigh on the currency. Markets are now anticipating a 50-basis point rate cut by the Reserve Bank of New Zealand (RBNZ) in February, reflecting concerns over the country's weak economic performance.
NZD/USD price dynamics (Nov 2024 - Jan 2025) Source: TradingView.
NZD/USD price forecast: Rate cut expectations weigh on recovery
This expectation limits the further upside for NZD/USD. On Wednesday, NZD/USD encountered resistance at the 0.618% Fibonacci retracement level, near 0.5650. This level coincided with the 100 EMA on the 4-hour chart, and led to a subsequent decline in price, which now trades at 0.5600 as of Thursday's early American trading session.
Following the price decline in recent sessions, the Relative Strength Index (RSI) on the 4-hour chart dropped from bullish territory and is now sitting at 50, signaling a loss of upward momentum.
Near-term support for the pair is at 0.5590, the lowest price level reached in 2024. Should the pair break below this level, further downside could be in play, with the next potential support at 0.5540. On the other hand, if the pair manages to reclaim the 0.5650 resistance level and sustain above it, it could trigger a continuation of the current rally towards higher levels.
The NZD/USD pair stayed firm above the 0.5600 level, marking its fourth consecutive day of gains. US Consumer Price Index (CPI) data sparked speculation that the Fed might cut interest rates twice this year.
