The NZD/USD pair has staged a modest recovery from below the 0.5500 psychological mark, the lowest level since March 2020, following the Reserve Bank of New Zealand’s (RBNZ) recent policy announcement. However, the rebound lacks momentum, with the pair currently trading around the 0.5535-0.5540 region, showing little change for the day.
Ongoing concerns about the US-China trade war, coupled with fears of a potential global economic downturn driven by US President Donald Trump’s sweeping tariffs, continue to weigh on investor sentiment. This has capped any significant recovery for the New Zealand Dollar (NZD), typically seen as a riskier asset. In contrast, the US Dollar (USD) has been under pressure for the second consecutive day, as market participants increasingly price in expectations of multiple interest rate cuts by the Federal Reserve (Fed), offering some support to the NZD/USD pair.
Technical Outlook: Bearish Bias Prevails, but Potential for Short-Term Rebound
From a technical standpoint, the breakdown below the key 0.5575-0.5580 horizontal support level triggered bearish sentiment. Oscillators on the daily chart remain deeply negative, yet still some distance from the oversold zone, signaling that the path of least resistance for the NZD/USD pair remains to the downside. Any potential rallies are likely to face resistance near the broken support level, which may act as a selling opportunity for traders.
That said, if the pair manages to push beyond the 0.5600 mark, it could spark a short-covering rally. Such a move could take the NZD/USD beyond the 0.5640-0.5645 resistance region and towards the next target at 0.5700, shifting the near-term bias towards bullish traders.
Downside Risks and Key Levels to Watch
On the downside, the 0.5500 psychological level, followed by the multi-year low at 0.5485, seems to offer immediate support. A sustained break below these levels would signal the continuation of the sharp decline from earlier this month, with the pair potentially targeting the 0.5400 round-figure mark.
For now, the NZD/USD pair remains at a critical juncture, with risks tilted to the downside, though short-term recoveries could lead to brief bullish rallies.
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