NZD/USD extends rejection slide from 200-day SMA; declines to 0.5825 amid firmer USD

The NZD/USD pair continues with its struggle to make it through a technically significant 200-day Simple Moving Average (SMA) and attracts fresh sellers during the Asian session on Tuesday. Spot prices slides to the 0.5825 region in the last hour, reversing a part of the previous day's recovery move from over a two-month trough, and seem vulnerable to weaken further.

The US Dollar (USD) regains positive traction amid persistent geopolitical uncertainties stemming from ongoing conflicts in the Middle East and turns out to be a key factor weighing on the NZD/USD pair. President Donald Trump said on Monday that the US had held productive conversations with Iran and that a deal could be reached soon. The optimism, however, fades rather quickly after Iran denied that it had held talks with the US to end the war in the Gulf.

Moreover, Mohsen Rezaei, the senior military adviser to Iranian Supreme Leader Mojtaba Khamenei, said that the war will continue until Iran receives full compensation for the damage it has sustained. Adding to this, reports of strikes on Iran’s gas infrastructure raise the risk of a further escalation and temper investors' appetite for riskier assets. This benefits the Greenback's status as the global reserve currency and drives flows away from the perceived riskier Kiwi.

Meanwhile, investors remain worried that the war-driven surge in energy prices would revive inflation and have been scaling back their expectations for further rate cuts by the US Federal Reserve (Fed). This pushes US Treasury bond yields higher and further underpins the USD. This, along with the Reserve Bank of New Zealand's (RBNZ) dovish stance and Fitch Ratings’ downgrade of the country’s credit outlook, validates the negative outlook for the NZD/USD pair.