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- NZD/USD drifts lower during the Asian session amid the emergence of some USD buying.
- A recovery in the global risk sentiment could cap the safe-haven USD and support the pair.
- Traders also await the Fed rate decision on Wednesday and the NZ GDP print on Thursday.
The NZD/USD pair meets with a fresh supply during the Asian session on Tuesday and erodes a part of the previous day’s solid recovery from the vicinity of a one-month low, touched last week. Spot prices currently trade just below mid-0.5800s and seem vulnerable while below a technically significant 200-day Simple Moving Average (SMA).
Investors now seem worried that a surge in Crude Oil prices following the US-Israel strikes on Iran would revive inflationary pressures and force the US Federal Reserve (Fed) to delay cutting interest rates. This assists the US Dollar (USD) to attract some dip-buyers and stall the overnight pullback from its highest level since May 2025, which, in turn, is seen as a key factor exerting some downward pressure on the NZD/USD pair.
Meanwhile, the Iran war has added a new layer of tension to the already strained relations between the US and China. In fact, US President Donald Trump said on Monday that he is planning to delay a high-stakes visit to China later in March by about a month because of the Iran war. This turns out to be another factor that undermines antipodean currencies, including the Kiwi, and contributes to the NZD/USD pair’s downtick.
That said, efforts to reopen shipping traffic in the Strait of Hormuz boost investors’ confidence. This is evident from a modest recovery in the global risk sentiment, which might keep a lid on any further appreciation for the safe-haven buck. Traders might also opt to wait on the sidelines ahead of the highly-anticipated FOMC policy decision on Wednesday. This, in turn, could act as a tailwind for the NZD/USD pair and help limit losses.
Investors this week will also confront the release of the quarterly GDP report from New Zealand, which could influence the New Zealand Dollar (NZD). Nevertheless, the aforementioned fundamental backdrop, along with a failure near the 200-day SMA, suggests that the path of least resistance for the NZD/USD pair is to the downside. Hence, any attempted recovery could be seen as a selling opportunity and is likely to remain limited.
