Weekly Market Analysis (October 7—October 11): Insights on NZDUSD Exchange Rate

The NZDUSD currency pair, commonly known as the "Kiwi," represents the exchange rate between the New Zealand Dollar (NZD) and the US Dollar (USD). Several factors influence the value of the New Zealand Dollar, including domestic economic indicators, commodity prices—particularly dairy, given New Zealand's status as a leading exporter—and the monetary policy decisions made by the Reserve Bank of New Zealand (RBNZ). Conversely, the US Dollar is impacted by various economic data from the United States, such as employment statistics, GDP growth rates, inflation reports, and interest rate decisions from the Federal Reserve.

Currently, analysts predict that the Reserve Bank of New Zealand may reduce interest rates from 5.25% to 5.0%. If this forecast materializes, it could lead to a depreciation of the New Zealand Dollar, as lower interest rates typically make a currency less appealing to investors. Consequently, the NZDUSD pair may experience a decline. However, if the RBNZ decides to maintain the current interest rate, it would indicate a stronger economic outlook, potentially resulting in an appreciation of the NZDUSD pair.

A more drastic cut of 0.5% in interest rates could signal deeper economic issues, further weakening the New Zealand Dollar and pushing the NZDUSD pair lower.

The last interest rate cut by the RBNZ occurred on August 14, 2024, which was an unexpected move that caused a significant drop in the NZDUSD.

In the United States, the Consumer Price Index (CPI) for September is expected to slow to 0.1%, down from the previous reading of 0.2%. Should the CPI align with this forecast, it may indicate a weakening of inflation, thereby reducing the likelihood of further interest rate hikes by the Federal Reserve. This scenario could weaken the US Dollar, leading to a potential rise in the NZDUSD pair.

Conversely, if inflation data comes in weaker than anticipated, it may suggest a more dovish stance from the Fed, further weakening the US Dollar and pushing the NZDUSD higher. On the other hand, stronger-than-expected CPI figures indicating rising inflation could lead to expectations of continued Fed policy tightening, resulting in a decline in the NZDUSD.

Analyzing the Daily timeframe, the NZDUSD has formed a rising channel pattern. Recently, the price broke below the lower trend line, with the MACD signal line rising above the histogram and the DeMarker indicator exiting the overbought zone.

Traders can expect further declines in the NZDUSD if it breaks below the support level at 0.6200, with potential targets set at 0.6130 and 0.6050.