NZD/USD manages to defend 0.6100 mark, bearish potential seems intact
|- NZD/USD remains depressed on Monday amid a modest USD strength.
- A softer risk tone contributes to the offered tone surrounding the pair.
- September Fed rate cut bets cap gains for the USD and lend support.
The NZD/USD pair kicks off the new week on a weaker note and drops to a multi-day trough during the Asian session, albeit finds some support near the 0.6100 round-figure mark. Any meaningful recovery, however, still seems elusive in the wake of a modest US Dollar (USD) strength and the cautious market mood.
The USD Index (DXY), which tracks the Greenback against a basket of currencies, climbs to its highest level since May 9 in the wake of the Federal Reserve's (Fed) hawkish stance, indicating only one rate cut this year. This, along with Friday's better-than-expected release of the flash US PMIs, continues to lend some support to the buck. Meanwhile, persistent geopolitical tensions and political uncertainty in Europe temper investors' appetite for riskier assets, which is seen as another factor that benefits the Greenback's relative safe-haven status and should act as a headwind for the risk-sensitive Kiwi.
Furthermore, expectations that the Reserve Bank of New Zealand (RBNZ) will cut rates earlier than projected might contribute to capping gains for the NZD/USD pair. In fact, the central bank projected that it will wait until the third quarter of 2025 before cutting rates amid still-elevated inflation. Market players, however, expect the beginning of the rate-cutting cycle early next year in the wake of the recent economic downturn. This, along with China's economic woes, warrants caution before positioning for any recovery for antipodean currencies, including the New Zealand Dollar (NZD).
The aforementioned fundamental backdrop suggests that the path of least resistance for the NZD/USD pair is to the downside. Traders, however, might refrain from placing aggressive bets and prefer to wait for this week's release of important US macro data – the final Q1 GDP print and the Personal Consumption Expenditures (PCE) Price Index. In the meantime, speeches by influential FOMC members could drive the USD demand and provide some impetus to the currency pair in the absence of any relevant market-moving economic releases from the US.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.