FX.co ★ Wiking | NZD/USD

The New Zealand Dollar (NZD) is carrying its recovery move from Thursday into Friday against the US Dollar (USD), approaching 0.5623. The kiwi is up since markets believe the Reserve Bank of New Zealand (RBNZ) is likely to continue tightening its monetary policy stance after maintaining the Official Cash Rate (OCR) at 2.75% on Wednesday. The RBNZ was expected to raise its OCR by 25 basis points (bps) to 3%, but the central bank's decision to hold the current level hurt the antipodean. Analysts at OCBC point out that the Reserve Bank of New Zealand's decision not to increase its OCR was not unanimous; "Governor Anna Breman voted with the majority for keeping rates on hold," while "Chief Economist Paul Conway backed a hike." Analysts stress that most committee members believed "the July and September rate increases needed more time to take effect, given the weak domestic demand." OCBC warns that it is "more of a pause than a dovish pivot." According to the report, "the RBNZ said tighter monetary policy was likely to be required, although the timing is data dependent," and "the focus has now shifted to December." As for policy expectations, the bank notes, "we continue to expect two more hikes, in December and 1Q27, which should contain further NZD downside." On the currency front, OCBC says "for NZD/USD, 0.5600 is the key level to keep in mind having tested ahead of the decision." The USD is under pressure heading into the weekend. Ahead, mid-term election headlines scheduled for Tuesday will be influential. According to ING, "new pressures in tech shares have prompted some risk aversion buying of US Treasuries, and as a result, the Dollar has been hit by downward moves in the front end." However, ING reminds us that "the moves in both equities and FX have been limited," as the episode shows "that the Dollar is still vulnerable to AI sentiment swings." Nonetheless, ING says, "as soon as tech stocks stop being front-page news, the USD has found no problems in finding buyers," adding that "we do not see how Wednesday's FOMC would change that dynamic." According to the bank, "yesterday's data in the US showed hawkish bias, with 3Q GDP print coming in above expectations at 3.4%, while core PCE in September was 0.3% MoM, keeping the Fed on the alert." As for prospects, ING argues that "the biggest threat to the Dollar today will come from some preventive unwinding of net long positions ahead of Tuesday's US midterm elections." As ING explains, "a clean Democratic sweep is trading at about 68% in prediction markets and could prove to be somewhat negative for the US Dollar from several angles, from increased risk of government shutdown and gridlock in the negotiations on the debt ceiling through to some adverse sentiment impact to the already vulnerable AI story." With this in mind, ING suggests that "we would be cautious in chasing USD gains in the next couple of days." On the daily chart, NZD/USD quotes at 0.5620 and continues to maintain a short-term bearish bias because the spot price has remained capped beneath the 20-day EMA at 0.5659. The currency pair is struggling to consolidate the latest upward move as price remains capped beneath the short-term trend filter, and the RSI near 45 confirms that spot has gained little momentum so far. To the upside, the first resistance is the 20-day EMA at 0.5659, the first technical level above spot that bulls should take back to release bearish pressure and pave the way for a recovery. As long as the pair trades below this technical level, prices could remain range bound or extend losses.