The Australian Dollar (AUD) and New Zealand Dollar (NZD) are both trading within established ranges against the US Dollar (USD) as market participants weigh central bank policy outlooks and geopolitical developments. The AUD/USD rebounded sharply after recent weakness, trading near 0.7155 and swinging between 0.7100 and 0.7168, with analysts at UOB viewing the current moves as part of a 0.7100–0.7215 range and noting that downward momentum has faded, shifting their stance to neutral [2]. The AUD's appreciation is supported by improving market sentiment, particularly on hopes of a US-Iran peace deal that could reopen the Strait of Hormuz and ease safe-haven demand for the USD [3]. However, the AUD faces headwinds from a surprise rise in Australia's unemployment rate to 4.5% in April, the highest in about four and a half years, which has dampened expectations for further Reserve Bank of Australia (RBA) rate hikes. Westpac pricing shows the probability of a rate hike at the next RBA meeting dropped to 3% from 13% prior to the jobs data release [3].
For the NZD/USD, the pair maintains a moderately negative tone and remains rangebound, with upside attempts capped below the 0.5880 area and support at 0.5815 still in sight [1]. The NZD is not drawing significant support from improved market sentiment or hopes of a peace deal in Iran, as investors expect the Reserve Bank of New Zealand (RBNZ) to keep rates steady at its upcoming meeting [1]. Inflation pressures remain high in New Zealand, but with GDP growth at just 0.2%, policymakers are expected to refrain from tightening further to avoid recession risks [1]. BBH's Elias Haddad expects the RBNZ to hold the Official Cash Rate (OCR) at 2.25% for a third consecutive meeting, with swaps pricing in 125 basis points of tightening over the next year, but the updated OCR track is likely to signal a more muted tightening cycle, totaling only 75 basis points of hikes by 2029 [4]. This muted outlook is seen as a headwind for the NZD, with the currency expected to remain confined to a 0.5800-0.6000 range in the near term [4].
Technical analysis for NZD/USD shows the pair trading within an ascending triangle pattern, with resistance at 0.5880-0.5890 and immediate support at 0.5860, guarding the path to the 0.5815 floor [1]. The 4-hour RSI is in the low 50s and the MACD is marginally positive, suggesting stabilizing momentum and a modest bullish bias, but no clear breakout has occurred [1].
Market sentiment for both currencies is influenced by shifting expectations for US Federal Reserve policy, with the CME FedWatch tool indicating a 41.0% probability of a 25-basis-point Fed rate hike by year-end, which could limit further declines in the USD [3].
CONCLUSION
Both the Australian and New Zealand Dollars are trading within well-defined ranges as central bank policy outlooks and geopolitical developments shape market sentiment. Muted expectations for further rate hikes from the RBA and RBNZ, combined with technical resistance levels, are capping upside potential for both currencies. Market participants are likely to remain cautious ahead of upcoming central bank meetings and further economic data releases.