The NZD/USD exchange rate has extended gains for a third session, reaching approximately 0.5840. The short-term price momentum strengthened as the pair surpassed the nine-day Exponential Moving Average (EMA).
Market Sentiment And Current Levels
However, the 14-day Relative Strength Index (RSI) remains below 50, maintaining a bearish sentiment. On the upside, the pair could target the 50-day EMA at 0.5891, which if breached, might propel it towards 0.6008, a three-month high.
Support is initially at the nine-day EMA of 0.5824. If this level is breached, there is potential for the pair to decline towards 0.5730, or even down to 0.5485, the lowest level since March 2020.
In currency movements, the New Zealand Dollar was strongest against the Japanese Yen. The percentage change within major currencies showed 0.51% for NZD against JPY and 0.22% against USD, while NZD dropped across others.
The data suggests a prevailing trend with short-term positive momentum but possible broader challenges. Traders are advised to consider these factors in their analyses and strategies given the current market conditions.
Impact Of Economic Factors
The NZD/USD is showing some short-term strength, having pushed above its nine-day moving average to trade near 0.5850. However, we see the broader momentum as bearish, with the 14-day RSI still below the 50-level. This suggests the current move up is a rally within a larger downward trend.
This recent Kiwi strength is partly supported by firming domestic data. We saw a 2.9% rise in the Global Dairy Trade index in the final auction of September, and the Reserve Bank of New Zealand has maintained a hawkish tone to combat inflation. These factors provide a fundamental reason for the currency’s bounce.
On the other side of the pair, the US Dollar remains weak due to the ongoing partial government shutdown and signs of a cooling labor market. Last month’s Non-Farm Payrolls data, which we saw come in at a disappointing 165,000, has increased bets that the Federal Reserve will pause its rate-hiking cycle. This economic uncertainty in the US is helping to lift the NZD/USD pair.
Given this setup, we see the 50-day EMA at 0.5891 as the key level to watch in the coming weeks. Traders could consider buying call options with a strike above 0.5900 to play a potential breakout, while also hedging with put options below the 0.5824 support level. This provides a way to manage risk if this rally fails to gather momentum.
We must remember the significant downward pressure from earlier in the year, when the pair hit a low of 0.5485 back in April 2025. If the current rally stalls before the 0.5891 resistance and breaks back below the nine-day EMA, it would be a strong signal that the bearish trend is resuming. At that point, we would look to add to short positions.
