NZD/USD Price Forecast: Weakens below 0.5900, but staying supported above 100-day SMA

The NZD/USD pair trades with mild losses around 0.5875 during the early European session on Wednesday. Escalating tensions in the Middle East boost a safe-haven currency such as the US Dollar (USD) and act as a headwind for the pair. 

Iran’s Chief of Staff Major General Ali Abdollahi on Wednesday warned Persian Gulf states against providing assistance to the US military amid heightened regional tensions. "We warn any assistance and facilitation provided to the aggressor U.S. army is tantamount to participation with U.S. military forces,” Abdollahi added. 

However, traders reduce their bets of the US Federal Reserve (Fed) rate hike in the September policy meeting after the release of unexpected job losses in July and tame inflation data. This, in turn, could weigh on the Greenback and cap the downside for the pair. 

"Benign inflation and signs of softness in the US labour market make a September Fed hike highly unlikely at this point—despite the modest firming in Fed expectations this morning," said Scotiabank analysts led by Shaun Osborne. "Short-term USD gains remain a fade from our point of view,” Osborne added. 

NZD edges above average as BNY questions pricing for further RBNZ hikes

Strategists at BNY observe that the Kiwi is trading with a modest tailwind, noting that “the NZD itself is now trading slightly above the rolling 12-month average.” However, they push back against the degree of tightening implied by current market pricing, stating that they “continue to doubt the current market pricing of interest rates expectations, where two more Reserve Bank of New Zealand (RBNZ) hikes are expected by year end.” While BNY acknowledges that “domestic activity remains robust,” they emphasise that “inflation expectations remain relatively well-anchored,” suggesting the case for additional RBNZ rate increases may be less compelling than investors currently assume.

Technical Analysis: NZD/USD maintains a mildly positive tone above the 100-day SMA

In the daily chart, NZD/USD holds a mildly bullish near-term bias as spot remains above the 100-day simple moving average (SMA) and the Bollinger Bands’ middle SMA, hinting at underlying demand on dips. The Relative Strength Index (14) around 55 keeps a neutral-to-positive tone, suggesting upside pressure is present but not stretched.

On the topside, initial resistance is defined by the August 17 high of 0.5926. The next hurdle is seen at the Bollinger upper band near 0.5940, where rallies could pause. Any follow-through buying above this level could pave the way to the 0.6000 psychologocal level. 

On the downside, immediate support is seen at the Bollinger middle band around 0.5855, followed by the 100-day SMA at 0.5830. A deeper retreat would expose the lower Bollinger band near 0.5770 as a more substantial floor.