The New Zealand Dollar (NZD) extended losses on Monday, with the NZD/USD pair retreating to around 0.5815 during the European session. The Kiwi came under renewed selling pressure as investors turned cautious ahead of the Reserve Bank of New Zealand’s (RBNZ) monetary policy announcement scheduled for Wednesday.
RBNZ expected to deliver back-to-back rate cuts
Market participants increasingly expect the RBNZ to lower its Official Cash Rate (OCR) by 25 basis points (bps) to 2.75%, marking a second consecutive rate cut. The growing dovish sentiment follows weaker domestic data, with New Zealand’s Gross Domestic Product (GDP) contracting by 0.9% in the second quarter—matching the pace of expansion in Q1. The result underscored the fragility of the economy, exceeding economists’ expectations for a smaller 0.3% decline.
A slowdown in economic activity has reinforced expectations that policymakers will maintain a more accommodative stance to support growth, further weighing on the Kiwi.
US Dollar strength adds to pressure on NZD
The US Dollar (USD) strengthened sharply, bolstered by safe-haven demand amid escalating political tensions in France and the ongoing US government shutdown. The US Dollar Index (DXY), which tracks the Greenback against six major peers, rose 0.7% to around 98.40, putting additional downside pressure on the NZD/USD pair.
Domestically, uncertainty also persists in the United States as the White House warned of possible mass layoffs if the funding deadlock continues.
Technical analysis: NZD/USD struggles below 20-day EMA
The Kiwi pair has failed to extend its four-day winning streak, slipping below 0.5840 and facing consistent resistance near the 20-day Exponential Moving Average (EMA) around 0.5847—a level that continues to cap short-term recovery attempts. The near-term technical outlook remains bearish.
The 14-day Relative Strength Index (RSI) has edged back above 40.00, but a renewed drop below this level could signal the return of bearish momentum.
On the downside, key support is seen at 0.5800, followed by the September 26 low of 0.5754 and the round-number level of 0.5700. Conversely, a decisive move above the psychological 0.6000 handle could open the door for a rebound toward the June 19 high of 0.6040 and the September 11 low of 0.6100.
