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- NZD/USD rebounds after retesting a four-month trough during the Asian session on Monday.
- Reports of a push for a US-Iran ceasefire weigh on the USD and lend some support to spot prices.
- Geopolitical risks remain in play, warranting caution before positioning for any further recovery.
The NZD/USD pair attracts some buyers near the 0.5680 region, or over a four-month trough retested during the Asian session on Monday, and for now, seems to have snapped a two-day losing streak. Spot prices currently trade just above the 0.5700 mark, up nearly 0.25% for the day, though the upside potential seems limited.
Bloomberg, citing Axios, reported that the US, Iran, and regional mediators are discussing terms for a possible 45-day ceasefire that could lead to an end of fighting. The headlines offer a temporary respite to the fragile global risk sentiment and undermine the US Dollar’s (USD) global reserve currency status, which turns out to be a key factor lending some support to the NZD/USD pair. Investors, however, remain on edge amid persistent geopolitical uncertainties.
US President Donald Trump threatened to destroy Iran’s civilian infrastructure, including power plants and bridges, if Tehran does not meet his deadline to reopen the Strait of Hormuz by Tuesday. Iran, on the other hand, outlined a new condition and said that the transit through the strategic waterway could resume if part of the revenue is allocated to compensate Iran for war-related damages. Moreover, chances of a deal over the next 48 hours remain low.
Meanwhile, investors remain worried that the war-driven surge in energy prices would rekindle inflationary pressures and force major central banks, including the US Federal Reserve (Fed), to adopt a more hawkish stance. In fact, traders are now pricing in a greater probability that the Fed will raise borrowing costs in 2026, which could act as a tailwind for the USD. This might cap the upside for the NZD/USD pair and warrants some caution for bullish traders.
Traders now look forward to the release of the US ISM Services PMI for some impetus later during the North American session amid thin liquidity on the back of the Easter Monday Holiday in many global financial markets. Nevertheless, the fundamental backdrop makes it prudent to wait for some follow-through buying before confirming that the NZD/USD pair has formed a near-term bottom and positioning for any further appreciating move.
