The NZD/USD pair is under pressure, trading around 0.6010 during the Asian session on Friday. The New Zealand Dollar (NZD) faces downward pressure due to concerns surrounding Donald Trump’s proposals to raise tariffs on Chinese goods, as New Zealand is a close trading partner of China. These concerns weigh on the outlook for the NZD, which has already shown vulnerability against the US Dollar (USD).
Concerns Over US-China Trade and Potential Stimulus from China
The looming threat of higher tariffs on Chinese goods, as proposed by Trump, raises uncertainty in global trade, especially for countries like New Zealand that heavily rely on trade with China. As a result, the NZD is experiencing a degree of weakness. However, there is some hope that potential stimulus measures from China could support the economy. The National People’s Congress Standing Committee concluded a five-day meeting recently, raising expectations of economic support measures. If China implements a stimulus package, it could bolster demand for New Zealand exports and potentially benefit the NZD.
US Dollar Strengthened by Rising Treasury Yields
The US Dollar (USD) is benefiting from a slight improvement in US Treasury yields. The US Dollar Index (DXY), which tracks the value of the USD against six major currencies, has risen to around 104.50. US Treasury yields have also seen some upward movement, with the 2-year yield standing at 4.20% and the 10-year yield at 4.33%, providing support to the Greenback. This rise in Treasury yields adds to the USD’s appeal, putting additional pressure on the NZD/USD pair.
Impact of Federal Reserve Rate Cut
On Thursday, the Federal Reserve announced a 25 basis point rate cut, bringing the target range to 4.50%-4.75%. This rate cut initially provided a boost to risk assets, including the NZD, which saw an over 1% rise following the Fed‘s announcement. However, the USD has regained some ground as US yields rise, limiting the NZD’s ability to sustain gains. Federal Reserve Chair Jerome Powell emphasized that the central bank would continue to monitor economic data and adjust policy as necessary to bring inflation back to the 2% target, signaling a cautious approach to further rate cuts.
Looking Ahead: Michigan Consumer Sentiment and Market Sentiment
Investors are now focusing on the release of the preliminary US Michigan Consumer Sentiment report later on Friday, which could provide further direction for the USD. Positive sentiment data could further strengthen the USD and exert more downward pressure on the NZD/USD pair.
Technical Outlook
The NZD/USD pair is under pressure but remains above key support levels. The recent dip below 0.6000 could open the door for further declines, with the next support target around the 0.5950 area. On the upside, resistance is seen near the 0.6050-0.6070 zone, where the pair may face challenges in recovering further.
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