The NZD/USD currency pair continued its upward momentum on Tuesday, extending its gains for the fifth consecutive day. After breaking through the 200-day Simple Moving Average (SMA) the previous day, the pair rose to the 0.5925-0.5930 region, marking a fresh year-to-date high during the Asian trading session. This surge was fueled by growing bearish sentiment surrounding the US Dollar (USD).
The US Dollar Index (DXY), which tracks the performance of the USD against a basket of major currencies, remains near a three-year low. This weakness comes amid heightened concerns over the economic repercussions of the escalating US-China trade war. On Friday, China retaliated against US tariffs by raising its import duties on American goods to 125%, following US President Donald Trump’s decision to impose tariffs up to 145%. This development has heightened fears of a recession, particularly as the US remains dependent on key Chinese imports, keeping pressure on the USD.
Adding to the bearish outlook for the dollar, markets are pricing in the possibility of the Federal Reserve (Fed) cutting interest rates more aggressively in 2025 due to the trade war’s economic impact. Currently, there is speculation that the Fed may lower borrowing costs by 90 basis points. This expectation, combined with Trump’s temporary tariff relief, has bolstered risk sentiment and further undermined the USD, benefiting the New Zealand Dollar (Kiwi).
The technical breakout above the 200-day SMA also contributed to the upward movement of the NZD/USD pair. Traders are now turning their attention to upcoming US economic data, including the Empire State Manufacturing Index, which could impact the USD and influence the pair’s momentum. However, all eyes will be on Federal Reserve Chair Jerome Powell’s speech on Wednesday, as investors look for clues regarding future rate cuts, which could further affect USD demand.
Related Topics:
