NZD/USD currency pair declined to close to 0.5935 in early Asian trading on Thursday under pressure from a stronger US Dollar as well as strengthened US-China trade tensions. The suspension of vital technology sales to China by the Trump administration, as well as strengthened restrictions by China on mineral exports, has increased fears of supply chain disruptions. In the meantime, the Reserve Bank of New Zealand’s 25-basis-point rate reduction last week was partially defused by hints that easing is coming to an end. Contributing to volatility, a US federal court halted Trump’s sweeping “Liberation Day” tariffs, further bolstering the US Dollar. Market participants now look to the US Q1 GDP preliminary reading, which can greatly impact the pair’s short-term direction.

KEY LOOKOUTS

• Any intensification or relaxation of trade tensions between the US and China would have a major influence on NZD/USD, as New Zealand has a significant trade relationship with China.

• The first release of US GDP figures will also be watched closely. A softer-than-anticipated reading can soften the US Dollar and see support for the Kiwi.

•   Expectations of future Reserve Bank of New Zealand rate cuts remain subdued. Any shifts in RBNZ tone or policy signals may affect NZD/USD sentiment.

•  General strength or weakness of the US Dollar, dependent on items like court decisions regarding tariffs and overall economy data, will remain a fundamental driver for the currency pair.

Market players will be paying close attention to a number of factors influencing the near-term direction of NZD/USD. Excluding tensions between the US and China are a key risk, as further escalation may bear down on the New Zealand dollar owing to its trade dependence on China. Another key event is the US Q1 GDP preliminary figure, with the release potentially weakening the US Dollar and providing respite to the Kiwi if softer than anticipated. In turn, the Reserve Bank of New Zealand’s conservative approach to further rate reductions implies muted downside from monetary policy, but any change in tone would be able to rapidly influence market sentiment. Lastly, the overall resilience of the US Dollar, driven by legal updates regarding tariffs and economic prints, will remain a significant driver for the direction of the pair.

NZD/USD also involve the ongoing US-China trade tensions, which can put pressure on the Kiwi because of New Zealand’s close relationship with China. Market participants are also concerned about the upcoming US Q1 GDP release as weaker-than-expected data can weaken the US Dollar and favor NZD/USD. Moreover, any changes in the RBNZ’s monetary policy expectations and overall US Dollar strength will be key considerations.

•  Silver is also fluctuating around the nine-day EMA at around $33.10 and serves as a near-term support.

• NZD/USD sagged to around 0.5935 against a stronger US Dollar and escalating US-China trade tensions.

• The Trump administration halted US sales of key US technologies to China as a counter-measure to China’s export curbs on minerals.

•  New Zealand’s proximity of trade with China exposes the Kiwi to worsening US-China relations.

•  The Reserve Bank of New Zealand lowered its Official Cash Rate by 25 basis points to 3.25%, but suggested easing may be approaching its conclusion.

•  Market expectations of another RBNZ rate cut in July have considerably decreased.

• A US federal court stopped Trump’s sweeping “Liberation Day” tariffs, which strengthened the US Dollar.

• Traders look for the US Q1 preliminary GDP figures, which can shape the US Dollar and NZD/USD trend.

Escalating tensions between the United States and China have brought uncertainly to New Zealand’s currency, as the nation has strong trade links with China. The recent move by the US government to limit the sale of key technologies to China is in retaliation to China imposing its own export restrictions on vital minerals. This tit-for-tat has made people uncertain about the security of global supply chains and subjected markets tied to both economies to stress.

NZD/USD DAILY PRICE CHART

CHART SOURCE: TradingView

Concurrently, the Reserve Bank of New Zealand recently cut its official interest rate but signaled that more cuts may not be soon in the offing, which has somewhat comforted investors. On the American side, a federal court temporarily suspended sweeping tariffs drafted by the Trump administration, causing the US Dollar to rally. Going forward, investors are on the lookout for releases of crucial US economic statistics that would determine the direction of both currencies in the weeks ahead.

TECHNICAL ANALYSIS

NZD/USD is facing resistance around the 0.5950 level, where sell pressure has developed, curbing upside strength. The pair’s recent slide towards 0.5935 indicates bearish sentiment building support from a stronger US Dollar. Important support levels to pay attention to are around 0.5900, a breach below which could see the downward move gain momentum. To change the short-term attitude back in favor of the upside, a bounce above 0.5950 would be necessary. Market players will also be keeping a close eye on moving averages and momentum indicators for guidance on the pair’s next move.

FORECAST

NZD/USD currency pair is able to stay above crucial support levels and the US economic data, especially the soon-to-be-released GDP report, arrives weaker than anticipated, the Kiwi may get some reprieve. Weaker US Dollar due to weak US growth figures would tend to lift demand for the New Zealand currency. Also, any indication that the Reserve Bank of New Zealand is approaching the end of its rate-cut cycle would enhance market conviction in the Kiwi to drive a possible rally above resistance levels near 0.5950.

On the bearish side, further aggravation of US-China trade tensions could prove significantly bearish for NZD/USD, considering New Zealand’s economic links with China. Additional constraints or retaliatory actions might depress investor sentiment and place bearish pressure on the Kiwi. Additionally, if the US GDP figure comes in stronger than expected or the US Dollar is generally strong as a result of positive economic news or legal decisions, the NZD/USD exchange rate might come up against lower support levels around 0.5900 or worse, furthering recent weakness in the pair.