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- NZD/USD turns positive for the second straight day on Monday amid a modest USD downtick.
- Stalled US-Iran peace talks, Hormuz risks, and hawkish Fed bets could limit further USD losses.
- Traders might also opt to move to the sidelines ahead of the FOMC policy meeting this week.
The NZD/USD pair attracts some dip-buyers at the start of a new week and builds on Friday’s bounce from the 200-day Simple Moving Average (SMA) support near the 0.5840 area. Spot prices climb back closer to the 0.5900 mark during the Asian session amid a modest US Dollar (USD) downtick, though the upside seems capped on the back of geopolitical uncertainties.
A generally positive tone around the equity markets is seen undermining the safe-haven Greenback and turning out to be a key factor offering some support to the NZD/USD pair for the second consecutive day. Any meaningful USD depreciation, however, seems elusive in the wake of stalled US-Iran peace talks. In fact, US President Donald Trump cancelled envoys Steve Witkoff and Jared Kushner’s trip to Pakistan aimed at advancing Iran war negotiations.
Meanwhile, Israeli Prime Minister Benjamin Netanyahu said he has ordered the military to vigorously attack Hezbollah targets in Lebanon. This comes on top of the US-Iran standoff over the Strait of Hormuz and continued supply disruption through the Strait of Hormuz, which revives inflationary concerns and hawkish US Federal Reserve (Fed) expectations. This, in turn, should limit deeper USD losses and keep a lid on further gains for the NZD/USD pair.
Traders might also opt to wait for the outcome of a two-day FOMC meeting on Wednesday, which will influence the USD price dynamics and provide a fresh impetus. In the meantime, bets that the Reserve Bank of New Zealand (RBNZ) may maintain a cautious policy stance or consider tightening to bring inflation back to the 2% midpoint amid persistent sticky inflation might hold back bearish traders from placing aggressive bets around the NZD/USD pair.
