The NZDUSD fell sharply over the last two months, driven by a rising Dollar Index and slowing economic indicators from New Zealand. The Kiwi has been moving within a flat range against the US dollar since early 2023, and the lower boundary of this range is now being tested. The reasons behind this retreat come from both sides. The newly expected tariff policies and a stronger-than-expected jobs market in the US have helped the dollar gain momentum against most other currencies. Meanwhile, New Zealand is facing a potential economic slowdown, with inflation dropping rapidly to 2.2% and other data showing signs of caution. This has put the RBNZ in a challenging position. This week’s 50 basis-point cut will likely be followed by further cuts in upcoming meetings. Markets anticipate at least 100 basis points in cuts by 2025, though there is a significant chance that this could be exceeded. 

(NZDUSD Daily Chart) 

Despite strong fundamental downside risks, the 0.5775 support level might hold for now, as Kiwi traders seem to require a correction following the sharp retreat. The Dollar Index has also been gaining value at a significant pace. If the support level continues to hold, there is a good chance for NZDUSD to make a move toward the 200-day moving average. If the move falls short of reaching the moving average, 0.60 could also be a potential target for an upward reaction. However, the fundamentals driving the downward trend remain intact, and unless incoming data signals a change, the 0.5775 support level will remain vulnerable in the coming weeks. A possible break to the downside could push the Kiwi–US dollar pair toward 0.55 over the medium term. 

Next week will be eventful for US markets, with key releases such as ISM manufacturing and services data, JOLTS, and the jobs report. Depending on the data, the Kiwi might either move toward the 200-day moving average or test the 0.5775 support level once again.