The NZD/USD pair dropped below 0.6150 during Monday’s European session as the Kiwi currency weakened amid a strengthening US Dollar (USD). This boost in the Greenback comes on expectations that the Federal Reserve (Fed) may begin a gradual policy easing process later this month.
The US Dollar Index (DXY), which measures the dollar’s value against six major currencies, surged past 101.50. Market sentiment appears to be selective, with risk-sensitive currencies like the NZD facing selling pressure, while interest in American equities has grown. S&P 500 futures saw notable gains during European trading, reflecting investors’ strong risk appetite.
Earlier, there were concerns that the Fed might implement a significant rate cut in September, given the sharp slowdown in US job growth signaled by the July Nonfarm Payrolls (NFP) report. However, Friday’s NFP data suggested that the labor market is in better shape than initially feared.
On the New Zealand Dollar front, weaker-than-expected growth in China’s Consumer Price Index (CPI) for August also weighed on the Kiwi. China’s annual CPI rose by 0.6%, slightly below the forecast of 0.7%, but higher than July’s 0.5%. Meanwhile, producer inflation fell sharply by 1.8%, reflecting weak demand, which could negatively impact China’s economy and its key trading partners, including New Zealand.
The NZD/USD pair faced a sharp decline after breaking below a Rising Wedge chart pattern on the four-hour timeframe, signaling a bearish reversal. The 20-period Exponential Moving Average (EMA) at 0.6190 is now sloping downward, indicating the onset of a short-term bearish trend.
The 14-period Relative Strength Index (RSI) has entered the bearish zone between 20.00 and 40.00, confirming the bearish momentum.
Further downside could occur if the pair decisively breaks below the July 17 high around 0.6100, potentially pushing it toward the May 3 high of 0.6046 and the key psychological support at 0.6000.
Conversely, a move above the September 6 high of 0.6250 could drive the pair higher toward the September 2 high of 0.6300, followed by this year’s peak at 0.6330.
