On Tuesday, the US Dollar (USD) demonstrated notable strength against both the New Zealand Dollar (NZD) and the Japanese Yen (JPY), driven by a combination of geopolitical tensions and mixed economic data releases. The NZD/USD pair reversed Monday’s gains, falling to the 0.5880 area after being rejected at 0.5926, as risk appetite diminished due to escalating tensions in the Middle East and the expiration of the US-Iran Memorandum of Understanding without progress in the peace process. The closure of the Strait of Hormuz has buoyed oil prices, further pressuring the risk-sensitive Kiwi. The USD was the strongest against the NZD among major currencies, with the NZD down 0.39% against the USD on the day [1].
Technical analysis for NZD/USD indicates that the pair trades at 0.5879, maintaining a mildly bullish bias above the 200-day simple moving average (SMA) at 0.5834. However, momentum indicators such as the daily Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) suggest waning upside pressure. Immediate support is at 0.5860, with key support at the 200-day SMA (0.5834); a break below this could signal a deeper correction toward the late July lows above 0.5760. On the upside, a clear break above the 78.6% Fibonacci retracement at 0.5916 is needed to shift focus toward the six-month highs near 0.6000 [1].
Meanwhile, the Japanese Yen underperformed its major peers, with USD/JPY trading 0.16% higher at around 159.70 during the European session. The JPY's weakness is attributed to market skepticism regarding the Bank of Japan's (BoJ) hawkish policy stance amid disappointing economic data. Japan’s GDP grew at a quarterly pace of 0.3% in Q2, below estimates and the previous 0.5%, while annualized growth was 1.1% versus the prior 1.8%. Economists at Societe Generale noted that continued weakness in consumption and capex could challenge expectations for a faster and higher BoJ rate-hike path, especially if services sector weakness persists [2].
USD/JPY technicals show the pair at 159.70, with a bearish near-term bias as it remains below the 20-day Exponential Moving Average (EMA) at 159.89 and the 61.8% Fibonacci retracement at 160.67. The Relative Strength Index (RSI) at 46.60 indicates neutral momentum. Immediate resistance is at the 20-day EMA (159.89) and 61.8% retracement (160.67), while support lies at the 50% retracement (159.64), 38.2% retracement (158.61), and 23.6% retracement (157.33) [2].
The US Dollar's marginal gains also come ahead of the Federal Open Market Committee (FOMC) minutes release, with the Fed having left interest rates unchanged at 3.50%-3.75% and providing no forward guidance on future rate moves [2].
CONCLUSION
The US Dollar outperformed both the New Zealand Dollar and Japanese Yen on Tuesday, supported by risk aversion from geopolitical tensions and mixed economic signals from Japan. Technical indicators for both NZD/USD and USD/JPY suggest cautious trading, with key support and resistance levels in focus. Market participants are awaiting further direction from upcoming FOMC minutes and ongoing geopolitical developments.