NZD/USD Price Trades with no Clear direction- Key Technical Levels

Expectations of Further Cuts

The Reserve Bank of New Zealand cut interest rates by 25 basis points (by majority vote, not unanimously), lowering the rate from 3.50% to 3.25%, in line with market expectations. The RBNZ also revised its interest rate outlook downward, indicating that further cuts are likely following the current May meeting.

As a result, markets have started pricing in the possibility of rates falling below the 3.00% mark—albeit gradually. Markets expect the rate to remain unchanged at the July meeting, with a potential cut in September, and a further drop below 3.00% possibly occurring in the fourth quarter.

Among the key reasons behind the RBNZ’s decision to further ease monetary policy are the ongoing uncertainties surrounding global economic growth. Additionally, current inflation levels remain relatively close to the 2% target, providing room for continued easing. The RBNZ also noted that the New Zealand economy is recovering from the technical recession it experienced last year, which was marked by negative growth in the second and third quarters.

Rising Risk Appetite

U.S. consumer confidence rebounded from a five-year low, rising from 85.7 in April to 98.0 in May. A major contributing factor was the Trump administration’s softened stance on tariffs and its renewed engagement in negotiations with several countries, most notably China. This included a mutual reduction in tariffs between the two nations.

Consumer confidence was also bolstered by ongoing U.S.-EU negotiations. President Trump had previously threatened to raise tariffs to 50% and implement them in early June. However, he quickly reversed course after a phone call with the President of the European Commission. Both sides agreed to continue negotiations through July 9 and work toward reaching a trade agreement by the deadline.

As confidence improved, equity markets stabilized, demand for government bonds increased (pushing the 30-year bond yield below 5%) and the decline of the U.S. dollar was halted. The dollar index rose by 0.6% yesterday.

NZD/USD Price Trades in a Narrow Range

On May 7, the NZD/USD pair corrected its upward movement and formed a lower high at 0.6021. This was followed by sideways trading, with the pair reaching a multi-month high before pulling back due to profit-taking.

Currently, the pair is trading within a price zone between 0.6039 and 0.5874 and appears to be heading toward testing the lower boundary of this zone. A daily close below 0.5874 would mark the end of the current sideways movement and signal the beginning of a downtrend, potentially pushing the price toward 0.5724. However, a potential rebound from support levels at the 50-day moving average and 0.5776 should also be considered.

Levels to Consider in the Opposite Scenario

A daily close above 0.6039 would signal the end of the sideways movement and could trigger the resumption of an uptrend, possibly taking the price higher toward 0.6217. However, resistance levels at 0.6084 and 0.6156 should be closely watched.

NZD/USD price – Daily Chart

Chart Source: ADSS Platform