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New Zealand Dollar drifts lower as USD recovers from post-NFP lows amid Mideast jitters
- NZD/USD meets with a fresh supply on Monday as geopolitical risks underpin the USD.
- Higher oil prices fuel inflation fears and Fed hike bets, which further benefit the buck.
- The hawkish RBNZ could support the NZD and limit losses ahead of US inflation figures.
The NZD/USD pair is seen extending Friday’s late pullback from the vicinity of the monthly peak – levels just above the 0.5900 mark – and drifting lower at the start of a new week. Spot prices, however, remain confined in a familiar range held over the past week or so and currently trade around the 0.5880 region, down 0.20% for the day, amid a modest US Dollar (USD) strength.
The immediate market reaction to the disappointing release of the US Nonfarm Payrolls (NFP) report on Friday seems to have faded as the geopolitical risk premium offers some support to the safe-haven USD. Meanwhile, the uncertainty over the Strait of Hormuz and fresh attacks by Iran-backed Houthi militants against Saudi energy infrastructure act as a tailwind for crude oil prices. This continues to fuel inflation fears and bets for at least one interest rate hike by the US Federal Reserve (Fed) in 2026.
Meanwhile, data released over the weekend showed that China’s annual consumer inflation rate slowed to a six-month low and producer price inflation eased more sharply than expected in July. This turns out to be another factor weighing on antipodean currencies, including the New Zealand Dollar (NZD), and contributing to the NZD/USD pair’s slide. However, the Reserve Bank of New Zealand’s (RBNZ) hawkish tilt could support the New Zealand Dollar (NZD) and help limit deeper losses for the pair.
Traders might also opt to wait for the latest US inflation figures, due this week, for more cues about the Fed’s future policy path. The outlook, along with further developments surrounding the Middle East crisis, will drive the USD demand and provide some impetus to the NZD/USD pair. In the meantime, the aforementioned mixed fundamental backdrop makes it prudent to wait for a breakdown through a one-week-old trading range support near the 0.5860 region before placing aggressive bearish bets.
NZD/USD 4-hour chart
Technical Analysis
With the NZD/USD pair hovers in a tight range and lacks a clear directional edge, leaving the near-term bias broadly neutral around the 0.59 handle. The 0.5865-0.5860 region should act as a short-term pivot and a sustained break below would be needed to bac the case for any further near-term depreciating move.
