The New Zealand Dollar (NZD) rebounded on Thursday during the American session, recovering to the mid-0.5800s after hitting two-week lows in the Asian session. This recovery was driven by a loss of momentum in the US Dollar (USD), following softer US producer prices and an increase in weekly Initial Jobless Claims, which tempered expectations for further Federal Reserve (Fed) tightening [1].
A key market-moving event was the release of the Reserve Bank of New Zealand (RBNZ) survey, which showed inflation expectations easing in the third quarter, dropping to 2.34% from 2.53% previously. This cooling of inflation expectations reduces the likelihood of further policy tightening by the RBNZ and contributes to a dovish backdrop for the Kiwi [1]. However, Brown Brothers Harriman’s Elias Haddad noted that inflation expectations remain close to the RBNZ’s 2% target midpoint, underscoring the central bank’s credibility. Haddad also argued that above-target inflation, a more favorable domestic growth outlook, and a policy rate near the lower end of the RBNZ’s neutral range (2.20%-4.10%) support the case for additional rate hikes, suggesting that further policy tightening may still be warranted despite well-anchored expectations [1].
Technical analysis indicates that NZD/USD trades at 0.5851, maintaining a mildly bearish near-term tone as it sits below the 20-period Simple Moving Average (SMA) at 0.5864 and just above the 100-period SMA at 0.5843. The Relative Strength Index (RSI) is around 43, signaling soft momentum but not an oversold condition, with sellers retaining control and moderate downside momentum [1]. Resistance levels are identified at 0.5853 and 0.5858, with stronger barriers at 0.5907 and 0.5930, while immediate support is seen at 0.5845, reinforced by the 100-period SMA at 0.5843 and a horizontal floor at 0.5842 [1].
Looking ahead, with little on the domestic calendar, market direction for NZD/USD is expected to be influenced by upcoming US data releases, specifically Friday's Retail Sales and Michigan Consumer Sentiment figures, which are anticipated to provide further guidance for the pair [1].
CONCLUSION
The New Zealand Dollar's recovery from recent lows was supported by easing inflation expectations and a softer US Dollar, though technical indicators suggest a mildly bearish tone persists. While the RBNZ survey points to a dovish outlook, analyst commentary highlights potential for further rate hikes if domestic conditions warrant. Near-term direction will likely hinge on upcoming US economic data releases.