NZD/USD price extends gains as U.S. dollar weakens on tariff delay
Kiwi dollar nears 0.5700 as RBNZ rate cut looms and USD weakens
The New Zealand dollar (NZD) continued its upward trajectory, reaching a two-week high near 0.57 on Friday. The kiwi gained ground as the U.S. dollar (USD) weakened, following delayed reciprocal tariff announcements by U.S. President Donald Trump.
Despite persistent expectations of a Reserve Bank of New Zealand (RBNZ) rate cut next week, NZD/USD maintained its bullish momentum amid a softer USD and improving domestic data.
NZD/USD price dynamics (Aug 2024 - Feb 2025) Source: TradinView.
USD weakness fuels NZD rally
The U.S. dollar retreated as Trump announced that his proposed reciprocal tariffs would take effect only after a White House review. This unexpected delay diminished USD’s safe-haven appeal, sending the U.S. dollar Index (DXY) to a four-week low around 106.80.
Despite the USD weakness, U.S. inflation data remained strong, with Producer Price Index (PPI) inflation exceeding expectations in January. As a result, markets pushed back expectations for a Federal Reserve rate cut from June to September, indicating the potential for prolonged USD strength in the long term.
RBNZ rate cut expectations and domestic growth
The RBNZ is expected to cut its Official Cash Rate (OCR) by 50 basis points (bps) to 3.75% on Wednesday, continuing its monetary easing cycle. Markets anticipate an additional 75 bps of rate reductions throughout 2025, which could limit NZD’s upside potential.
However, recent domestic economic data has been encouraging. New Zealand’s factory activity expanded in January for the first time in nearly two years, marking its strongest growth since September 2022. This positive momentum helped bolster investor sentiment, providing near-term support for NZD/USD.
Technical outlook: Key resistance levels in focus
NZD/USD is testing the 0.57 level, with the next key resistance at 0.572. A breakout above this range could push the pair toward the November 29 high of 0.593, followed by 0.6 as a psychological resistance.
On the downside, immediate support is seen at 0.55, with further losses potentially extending toward 0.54 and 0.53 if bearish momentum resumes. The 20-week Exponential Moving Average (EMA) at 0.5777 remains a critical resistance level, with its downward slope signaling an overall bearish medium-term outlook.
Market watch: Tariffs and RBNZ decision key catalysts
Looking ahead, traders will closely monitor the RBNZ policy decision next week, along with any updates on Trump’s reciprocal tariffs. The delayed tariff implementation has supported risk-sensitive assets like the NZD, but further USD strength could emerge if inflation concerns persist in the U.S.
Previously, we highlighted NZD/USD’s struggle amid RBNZ rate cut speculation and U.S. inflation concerns. While the Kiwi remains resilient, upcoming central bank decisions and U.S. economic indicators will dictate the next major move.
