NZD/USD climbed 0.66% to near 0.5930 during Monday’s European session, supported by upbeat market sentiment favoring riskier assets. The New Zealand Dollar (NZD) outperformed its peers as investors reacted to dovish expectations for the Federal Reserve.
Fed dovish bets underpin NZD
Soft US nonfarm payrolls (NFP) data for August fueled speculation that the Fed will cut interest rates in its upcoming policy announcement. According to the CME FedWatch tool, traders assign a 10% probability to a 50-basis-point cut to 3.75%-4.00%, with the remaining probability pointing to a 25-bps reduction. Cooler US labor market conditions have intensified the Fed dovish narrative.
USD weakness supports upside
Rising risk appetite has reduced the safe-haven appeal of the US Dollar (USD). The US Dollar Index (DXY), which tracks the Greenback against six major currencies, is trading lower near 97.60, providing further tailwinds for NZD/USD.
Technical outlook: bullish momentum above 200-day EMA
NZD/USD has broken above the 200-day exponential moving average (EMA) around 0.5912. The 14-day relative strength index (RSI) approaches 60, with a fresh bullish momentum likely if it breaks above that level.
Key levels to watch
On the upside, a move above the psychological 0.6000 level could see NZD/USD targeting the June 19 high of 0.6040 and the September 11 low of 0.6100. On the downside, a breach below the August 2 low of 0.5800 would expose support at the April 11 low of 0.5730, followed by the round-level support at 0.5700.
