- NZD/USD attracts sellers for the third straight day as Mideast tensions benefit the safe-haven USD.
- Rising Oil prices fuel inflationary concerns and hawkish Fed bets, which further underpin the buck.
- Hawkish RBNZ expectations could offer some support to the NZD and help limit losses for the pair.
The NZD/USD pair remains under some selling pressure for the third consecutive day and trades around the 0.5865-0.5860 area during the Asian session on Tuesday. Spot prices seem vulnerable to extend the previous day’s retracement slide from the 0.5925 horizontal resistance, or over a two-week high, as rising geopolitical tensions continue to underpin the US Dollar (USD).
In the latest developments, US President Donald Trump told Fox News on Monday that Iran will be blown off the face of the earth if they attack US vessels engaged in Project Freedom – aimed at guiding ships stranded in the Strait of Hormuz. Elsewhere, the United Arab Emirates (UAE) reported that its air defenses had engaged with missile attacks and incoming drones from Iran. This comes on top of the lack of progress in US-Iran peace talks and keeps geopolitical risks in play, which is seen acting as a tailwind for the safe-haven USD and exerting pressure on the NZD/USD pair.
Meanwhile, the US-Iran standoff led to the overnight rise in Crude Oil prices, reviving inflationary concerns and bets for more hawkish central banks, including the US Federal Reserve (Fed). The outlook remains supportive of elevated US Treasury bond yields and turns out to be another factor further benefiting the buck. Meanwhile, expectations that the Reserve Bank of New Zealand (RBNZ) would maintain a cautious stance or consider tightening to bring inflation back to the 2% midpoint could support the New Zealand Dollar (NZD) and limit losses for the NZD/USD pair.
Even from a technical perspective, the recent repeated failures near the 0.5920-0.5925 supply zone validate the negative outlook and suggest that the path of least resistance for spot prices is to the downside. However, last week’s resilience below the 200-day Simple Moving Average (SMA) makes it prudent to wait for strong follow-through selling before positioning for any further losses. Traders now look to the US macro data – ISM Services PMI, JOLTS Job Openings, and New Home Sales. This, along with speeches by FOMC members, might influence the USD and the NZD/USD pair.
