NZD/USD continues to fall, touching close to 0.5650, as risk aversion builds up before the Federal Reserve’s interest rate decision. The market expects the Fed to keep its policy rate between 4.25% and 4.50%, with market participants listening for cues from Fed Chairman Jerome Powell regarding future policy moves. Meanwhile, a little boost is given to the US Dollar from a cautious Fed outlook and the recent threat of tariffs by the former US President Donald Trump, who seeks to improve the production units at home. New Zealand Dollar remains under stress due to ever-increasing dovish expectations around the Reserve Bank of New Zealand (RBNZ), with markets pricing in a high likelihood of another 50 bps rate cut in February. RBNZ Chief Economist Conway reconfirmed that the Official Cash Rate (OCR) will move gradually towards neutral, further weakening the Kiwi.

KEY LOOKOUTS

• The Federal Reserve will make its policy decision, which is widely certain to leave the rates unchanged. Fed Chair Powell’s comments might be the only clue about future monetary policy directions.

• The Greenback makes a recovery on tariff threats from former President Trump on key imports, suggesting shifts in trade policy that may influence global currency markets and investor sentiment.

• Markets are pricing in a 50 bps rate cut by the Reserve Bank of New Zealand in February, with expectations of further easing weighing heavily on the New Zealand Dollar’s outlook.

• Risk aversion, now persistent, ahead of a series of key central bank decisions continues to weigh on NZD/USD, as global investors increasingly seek out safe-haven assets, creating volatile currency valuation and broader financial market dynamics.

NZD/USD remains on the back foot ahead of the Federal Reserve interest rate decision as markets are expected to hold the rates at 4.25%-4.50%. Fed Chair Jerome Powell’s speech is going to be closely watched for policy cues that could impact the strength of the US Dollar. The Greenback has already gained significant traction due to tariff threats from former President Donald Trump, which is further strengthening risk-off sentiment. Meanwhile, expectations of a 50 bps rate cut by the Reserve Bank of New Zealand (RBNZ) in February continue to weigh on the Kiwi, with the central bank signaling a gradual move toward a neutral rate. Amid these developments, risk sentiment and broader market reactions will play a crucial role in shaping NZD/USD’s near-term trajectory.

NZD/USD remains on the back foot ahead of the Fed’s interest rate decision as traders are holding on to Powell’s speech for cues on policy. The US Dollar strengthens on shifting trade policies while Kiwi remains on the back foot as expectations of a 50 bps RBNZ rate cut remain in place. Risk-off sentiment and market reactions will remain key drivers for NZD/USD.

• The pair is still weakening and trading near 0.5650 as the market is averse to risks ahead of the Fed’s policy decision.

• The Federal Reserve is likely to keep rates unchanged at 4.25%-4.50%, while Powell’s speech will be something to watch out for future policy signals.

• The Greenback is bolstered by the Fed’s cautious outlook and tariff threats by former President Trump on key imports.

• The Reserve Bank of New Zealand is expected to cut 50 bps in February, and easing is expected throughout 2025.

• Uncertainty in global markets is pushing investors towards safe haven assets, and risk-sensitive currencies such as the New Zealand Dollar continue to face further pressure.

• Traders will keep a close eye on both the Fed and RBNZ, as their respective stances are expected to set the tone for NZD/USD.

• The Kiwi may remain under pressure with the RBNZ signaling a shift toward a neutral rate, and this will be influenced by domestic inflation trends and global risk factors.

NZD/USD continues to move lower, trading near 0.5650 as investors remain cautious ahead of the Federal Reserve’s interest rate decision. Markets widely expect the Fed to maintain its policy rate at 4.25%-4.50%, but all eyes are on Fed Chair Jerome Powell’s speech for hints at future policy tightening. The US Dollar remains firm on the back of a dovish Fed and renewed threats of tariffs from former President Donald Trump, which has stoked concerns about the global trade dynamic. As risk sentiment erodes, risk-sensitive currencies are being shunted toward safe havens, piling on further pain for the New Zealand Dollar.

NZD/USD Daily Chart

TradingView Prepared by ELLYANA

Kiwi faces intense selling as there is rising belief that the RBNZ is likely to follow through with a 50 bps rate cut this February. Since it is expected to stay dovish and ease its policies throughout 2025, New Zealand remains exposed to more bears. The dovish tilt was furthered by RBNZ Chief Economist Conway’s statement reiterating the gradual shift towards a neutral rate. As the inflation expectations keep falling and domestic pricing pressures are eased, the RBNZ would be more likely to take an accommodative turn, which should weigh on NZD/USD in the long term. With these recent developments, market participants will continue to watch out for the Fed’s policy signals as well as the global risk sentiment to decide the next steps of the pair.

TECHNICAL ANALYSIS

NZD/USD is holding on to a bearish momentum since it’s again trading close to the 0.5650 support point, marking third consecutive loss points. The chart is below main moving averages-50-day and 200-day EMA have acted as hurdles for the present, showing how the pair continued its downtrend. RSI is still approaching the oversold boundary, so at this stage, an immediate correction can’t be denied since selling pressure also seems strong for the time being. The next immediate support is around 0.5620, a break below which could open the door for further losses toward 0.5580. On the upside, resistance is seen near 0.5700, followed by 0.5750, where sellers are likely to emerge. A daily close below 0.5650 could reinforce bearish sentiment, while any recovery above 0.5700 may signal a temporary reversal. Traders should watch for shifts in momentum and key technical indicators to assess the next move of the pair.

FORECAST

NZD/USD may witness short-term bounces as a result of technical corrections or changes in market sentiment. If the pair manages to hold above the 0.5650 support level and breaks past the resistance at 0.5700, a recovery toward 0.5750 or higher might be possible. A weaker-than-expected US jobs report or dovish comments by Fed Chair Jerome Powell may pressure the US dollar, which may only temporarily provide support to the Kiwi. It will also keep losses in the currency pair down and support a potential short-term pop if New Zealand shows some more resilience in economic data, such as through stronger-than-expected inflation and employment numbers. However, such momentum would need more hawkish tone from the RBNZ or a global risk sentiment shift.

NZD/USD remains bearish due to macroeconomic and central bank policy factors. The Federal Reserve is still cautious with its interest rates, and its expectations of a higher-for-longer interest rate environment continue to support the US Dollar, making it challenging for the Kiwi to rally. Additionally, dovish expectations about the Reserve Bank of New Zealand, as markets have been pricing in a 50 bps rate cut in February, further weigh on NZD/USD. If the pair breaks below the key support level of 0.5620, then it may prolong its losses up to 0.5580 or even lower. Continued risk aversion, geopolitical uncertainties, and poor economic data coming from New Zealand will probably accelerate the downtrend within the coming weeks.