NZD/USD trades 0.22% higher around 0.5940 during Wednesday’s European session, as the New Zealand Dollar (NZD) benefits from an upbeat market mood. Risk appetite has improved amid expectations that the Federal Reserve (Fed) will cut interest rates at its policy meeting next week. According to the CME FedWatch Tool, traders see an 8.4% chance of a 50-bps rate cut to 3.75%-4.00%, with the remainder anticipating a standard 25-bps reduction.
China inflation adds headwinds for NZD
The Kiwi’s gains come despite softer-than-expected inflation in China. China’s Consumer Price Index (CPI) for August rose just 0.4% year-on-year, below the expected 0.2% decline from July’s flat reading. Monthly CPI remained flat. Given New Zealand’s reliance on exports to China, declining inflationary pressures in Beijing may limit the NZD’s upside.
Technical outlook
NZD/USD hovers near the downward-sloping trendline from the July 1 high of 0.6120. The pair remains above the 20-day Exponential Moving Average (EMA) at 0.5900, supporting a bullish near-term trend. The 14-day Relative Strength Index (RSI) approaches 60, suggesting that a break above this level could trigger fresh bullish momentum.
If bullish momentum persists, the pair could target the June 19 high at 0.6040 and the September 11 high near 0.6100, with the psychological 0.6000 level as a key barrier. On the downside, a move below the August 2 low of 0.5800 would expose NZD/USD to support at 0.5730, followed by the round-level 0.5700.
