NZD/USD currency pair surges above the 0.6000 threshold, currently trading around 0.6025 during early European sessions on Wednesday, buoyed by positive market mood fueled by hopes of trade deals. Increased hopes of more US-China agreement, complemented by a surprise lowering of Japanese import tariffs announced by former President Trump, have lifted risk appetite, favoring the New Zealand Dollar. But risks are still on the downside as softer-than-anticipated New Zealand inflation figures have strengthened bets for the Reserve Bank of New Zealand (RBNZ) to cut rates in August, with markets currently pricing an 85% probability of a 25-basis-point cut.
KEY LOOKOUTS
• Markets are pricing an 85% probability of a 25bps cut; confirmation could have significant bearing on the NZD.
• Any news from Stockholm high-level meetings and tariff extension updates will be closely observed for their risk sentiment influence.
• The initial July Purchasing Managers Index (PMI) readings in the US may impact USD strength and direction of NZD/USD.
• Since it is an important trading partner, any indication of economic pressure or trade tension in China will have a direct bearing on the Kiwi.
The NZD/USD currency pair continues to extend its rally, trading at around 0.6025 against the background of a boost in risk appetite fueled by improved trade sentiments following revived optimism over US-China talks. Traders are upbeat with evidence of progress on the US-China trade talks, such as completion of details of previous agreements and an unexpected reduction in tariffs on Japanese imports by Trump. This favorable setting has buoyed the New Zealand Dollar, a risk-sensitive currency. Nevertheless, caution remains as investors expect a probable rate cut by the Reserve Bank of New Zealand in August after underestimating inflation data, and this would cap further gains in the pair.
NZD/USD is traded around 0.6025, supported by positive risk mood following renewed US-China trade optimism. Yet, RBNZ rate cut expectations in August after soft inflation numbers might cap further gain.
• NZD/USD advances to close to 0.6025, 0.40% higher in initial European trading.
• Trade optimism prods the Kiwi as US and China wrap up deal details.
• Trump announces lower tariff on Japanese imports, boosting risk appetite.
• Potential US-China talks next week in Stockholm can sway direction.
• New Zealand CPI data were lower than expected for Q2.
• The markets anticipate an 85% probability of a 25bps RBNZ rate cut in August.
• US PMI figures on Thursday will be watched closely for USD movement.
The New Zealand Dollar is gaining strength from an upsurge of friendly trade sentiment, especially around developments between China and the United States. Recent comments from a Chinese embassy official reaffirmed that both countries have completed the details of implementing an earlier agreed upon deal between former President Trump and President Xi. This boosted market sentiment, particularly for risk-sensitive currencies such as the NZD. Complementing the optimistic tone, Trump also declared the slashing of tariffs on Japanese imports, dispelling fears of an aggressive trade policy and further enhancing global investor confidence.
NZD/USD DAILY PRICE CHART
SOURCE: TradingView
But even with the supportive trade environment, economic fundamentals in New Zealand are becoming worrying. Consumer prices in New Zealand increased lower than anticipated during the second quarter, sparking hope that the Reserve Bank of New Zealand can decide on a rate cut in its next policy meeting. With the majority of the market already discounting a 25 basis point cut in August, sentiment on the Kiwi is still cautious. In the meantime, the market is following closely behind the next batch of US-China negotiations and US economic releases for further information on the global outlook.
TECHNICAL ANALYSIS
NZD/USD has recaptured the psychological level of 0.6000 and is stabilizing around 0.6025, showing short-term bullish momentum. If the couple holds above support at 0.6000, it could try to test the subsequent resistance area of 0.6050–0.6070. A decisive break above this level would usher the route towards 0.6100. At the bottom, the key support at 0.5980, and a violation thereof could leave the pair exposed to more losses towards 0.5950, indicating fresh bearish pressure.
FORECAST
If favorable trade trends persist—especially improvements in coming US-China talks and additional relief from tariffs—the NZD/USD pair could continue its upward movement. A prolonged risk-on market, facilitated by healthy global market sentiment and supportive US economic news, can drive the pair to resistance levels of about 0.6070 and even 0.6100. Any unexpected hawkish bias from the RBNZ or stabilization of New Zealand’s inflation trends could also be a factor for further gains.
On the flip side, if future US economic data, including the PMI reading, are stronger than anticipated, the US Dollar can regain power and push the NZD/USD pair. Furthermore, any renewed trade tensions or break in the US-China talks will reverse prevailing optimism and drive the Kiwi downwards. A confirmed RBNZ rate cut in August, particularly if combined with dovish forward guidance, might further pressure the pair, with potential falls towards 0.5950 or lower.
