NZD/USD Struggles To Hold 0.6100 Level

NZD/USD was weak in Asia on Monday, falling to multi-day lows, though it found some support around the 0.6100 round number. However, a significant rebound still seems elusive amid a slightly stronger U.S. dollar (USD) and cautious market sentiment.

The U.S. Dollar Index (DXY), which tracks the greenback against a basket of currencies, rose to its highest level since May 9 following the Federal Reserve’s (Fed) hawkish stance that only one rate cut this year would be made. This, coupled with the better-than-expected initial reading of the U.S. Purchasing Managers’ Index released on Friday, continued to provide some support for the dollar. Meanwhile, continued geopolitical tensions in Europe and an uncertain political outlook have reduced investor appetite for risky assets, which is seen as another factor that favors the dollar’s relative safe-haven status and should be bearish for risky assets such as the New Zealand dollar.

In addition, expectations that the Reserve Bank of Australia will cut interest rates earlier than expected may curb NZD/USD gains. In fact, the RBA expects to wait until the third quarter of 2025 before cutting interest rates as inflation remains high. However, market participants expect the RBA to start a rate cut cycle early next year amid the recent economic downturn. Coupled with the troubled Chinese economy, investors need to be cautious before establishing positions on the rebound of the Australian and New Zealand currencies, including the New Zealand dollar.

The above fundamental background suggests that the NZD/USD pair has the least resistance to the downside. However, traders may avoid making aggressive bets and instead wait for the release of important US macro data this week – the final value of the first quarter gross domestic product (GDP) and the personal consumption expenditure (PCE) price index. At the same time, in the absence of important market economic data releases in the United States, speeches by influential Fed members may boost demand for the US dollar and provide some impetus for NZD/USD fluctuations.

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