- NZD/USD retains its positive bias for the third straight day amid a combination of supporting factors.
- Receding Fed-hike bets weigh on the USD, while bets for another RBNZ rate hike support the NZD.
- Geopolitical risks could limit losses for the safe-haven USD and cap the pair ahead of flash US PMIs.
The NZD/USD pair attracts buyers for the third straight day and climbs to a fresh high since early June, around the 0.5965-0.5970 region during the Asian session on Friday. Spot prices remain on track to register strong weekly gains amid a supportive fundamental backdrop.
The US Dollar (USD) struggles to capitalize on the previous day’s bounce from a three-month low amid receding bets for an immediate interest rate hike by the US Federal Reserve (Fed). The New Zealand Dollar (NZD), on the other hand, draws some support from expectations of another interest rate hike by the Reserve Bank of New Zealand (RBNZ). These turn out to be key factors lending support to the NZD/USD pair.
Meanwhile, investors remain worried about inflation risks stemming from higher oil prices due to the Middle East crisis. Adding to this, hawkish FOMC Minutes released on Wednesday keep the door open for some policy tightening by the US central bank. Furthermore, traders continue to price in the geopolitical risk premium amid the US-Iran stalemate over the Strait of Hormuz, which should limit losses for the safe-haven buck.
In the latest developments, President Donald Trump said that the US will launch the most crushing economic operation against Iran and threatened severe penalties on any nation that helps Tehran evade sanctions or does business with Iran. Moreover, Vice President JD Vance said that economic pressure is the most effective tool against Iran. This warrants some caution for USD bears and positioning for further NZD/USD appreciation.
On the economic data front, New Zealand recorded a monthly trade deficit of NZ$1.95 billion in July. This, however, does little to provide any meaningful impetus as spot prices remain at the mercy of USD price dynamics. Traders now look forward to the release of flash US PMIs, which, along with the incoming geopolitical headlines, will drive the buck and produce short-term trading opportunities around the NZD/USD pair.
NZD/USD 4-hour chart
Technical Analysis
The NZD/USD pair is extending its gains above the 200-period Exponential Moving Average (EMA) at 0.5851, which now underpins a bullish near-term bias. Any corrective pullback could find demand near the said pivotal support before the broader bullish structure is questioned.
