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- NZD/USD shows some resilience below 0.5900 and attracts some dip-buyers on Monday.
- US-Iran tensions and reviving Fed rate cut bets support the USD and might cap the pair.
- Traders this week will take cues from NZ employment details and the key US NFP report.
The NZD/USD pair attracts some dip-buyers at the start of a new week and climbs back above the 0.5900 mark during the Asian session. Bulls, however, need to wait for a convincing breakout through the 0.5920-0.5925 horizontal barrier before positioning for any further gains, as the focus remains glued to developments surrounding the Middle East crisis.
US President Donald Trump announced over the weekend that the US will begin guiding neutral ships stranded in the Strait of Hormuz under an operation called Project Freedom and added that if this process is disrupted, we will deal with it by force. In response, Ebrahim Azizi, head of the Iranian parliament’s National Security Commission, issued a formal warning that any US interference in the strategic waterway would constitute a ceasefire violation. This keeps geopolitical risks in play, which could benefit the safe-haven US Dollar (USD) and act as a headwind for the NZD/USD pair.
Meanwhile, Minneapolis Federal Reserve (Fed) President Neel Kashkari said on Sunday that a prolonged Iran conflict increases inflation risks and economic damage. Moreover, Kashkari raised the possibility of moving rates higher, citing uncertainty around all aspects of the war. This turns out to be another factor underpinning the USD. However, expectations that the Reserve Bank of New Zealand (RBNZ) would maintain a cautious stance or consider tightening to bring inflation back to the 2% midpoint counter the negative factors, supporting the New Zealand Dollar (NZD) and the NZD/USD pair.
The mixed fundamental backdrop, in turn, makes it prudent to wait for a sustained strength beyond the aforementioned barrier before positioning for the resumption of the recent strong move up from the April monthly swing low. There isn’t any relevant economic data due for release from the US on Monday, leaving the USD at the mercy of geopolitical headlines. Traders this week will further take cues from key US macro releases, including the Nonfarm Payrolls (NFP) report, which, along with the quarterly employment report from New Zealand, should provide a fresh impetus to the NZDUSD pair.
