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NZD/USD Bulls Eye 0.6000 as RBNZ Expectations Build
Traders' Opinions
Summary:
NZD/USD climbs toward 0.5980 as Dollar weakness and RBNZ tightening expectations support the Kiwi. Record NZD short positioning could amplify the rally if the pair clears 0.6000.
Buy
TradingNZDUSD
EXP
0.59800
Entry Price
0.61800
TP
0.58400
SL
0.59602 -0.00160 -0.27%
0
Point
Flat
0.58400
SL
CLOSING
0.59800
Entry Price
0.61800
TP
NZD/USD extends its rally on Friday, climbing around 0.62% to the 0.5980 area and reaching its strongest level since early June. The Kiwi is also on course for a solid weekly advance as persistent US Dollar weakness combines with expectations that the Reserve Bank of New Zealand (RBNZ) could tighten policy further.
The Greenback remains the main driver behind the move. The US Dollar Index (DXY) has slipped around 0.23% to 98.65, with traders continuing to unwind expectations for an immediate Federal Reserve rate hike. Recent softer US economic figures have made a near-term move less convincing, even though the latest FOMC Minutes showed policymakers remain concerned about inflation and are prepared to tighten again if price pressures fail to moderate.
That leaves an increasingly favourable rate backdrop for the Kiwi. While markets have become less convinced that the Fed needs to act immediately, expectations for further RBNZ tightening remain alive. New Zealand’s July trade deficit of NZ$1.949 billion did little to interrupt the rally, suggesting monetary-policy expectations and broad Dollar selling are currently carrying considerably more weight than the latest domestic trade figures.
Positioning could also become an important factor. MUFG notes that leveraged funds have accumulated their largest net-short NZD position in data going back to 2006, despite the Kiwi ranking among the strongest-performing G10 currencies this year. With markets pricing close to 100 basis points of RBNZ tightening over the coming 12 months, such stretched bearish positioning creates the potential for further short covering if NZD/USD continues higher.
The main obstacle remains geopolitical uncertainty. Continued US-Iran tensions surrounding the Strait of Hormuz and elevated Oil prices could revive inflation concerns and eventually strengthen the case for another Fed hike. A deterioration in risk sentiment could also restore some safe-haven demand for the Dollar.
Attention now shifts toward the preliminary US S&P Global PMIs. Manufacturing activity is expected to ease marginally to 53.8, while Services PMI is forecast at 54.0. Another disappointing set of figures could deepen the Dollar's retreat and give NZD/USD the momentum required to challenge the psychologically important 0.6000 level.
The underlying momentum remains firmly in favour of NZD/USD while the Dollar stays under pressure. More importantly, record speculative Kiwi shorts leave the market vulnerable to a squeeze. A convincing move through 0.6000 could therefore attract additional momentum buying and extend the current recovery.
Technical Analysis
NZD/USD continues to lean firmly to the upside, with the 4-hour chart showing a steady progression of higher lows supported by the ascending trendline stretching back to the late-June trough. The latest burst of buying has lifted the pair toward 0.5980, placing price directly against an important resistance pocket around 0.5950–0.5985 and within striking distance of the psychological 0.6000 mark.
What stands out is the strength of the latest breakout. NZD/USD has cleared several previous swing highs while repeatedly respecting its rising trendline, suggesting that buyers continue to dictate the broader direction. The 0.5950 area now becomes the first level to watch on any retracement. If price dips back toward this region and buyers step in, it would confirm that previous resistance is beginning to function as support and could provide the foundation for another push higher.
Further weakness would bring 0.5890–0.5910 into play. This zone carries greater technical importance because it sits close to both previous consolidation and the rising trendline. Holding above it would keep the broader advance largely undisturbed. A sustained break underneath, however, would suggest the rally is losing momentum and could drag the pair toward 0.5790–0.5810. Below there, 0.5670–0.5690 remains the deeper structural support area.
For buyers, 0.6000 is the immediate hurdle. The psychological significance of this level could generate some hesitation or profit-taking, particularly after the pair’s recent acceleration. Nevertheless, a convincing 4-hour break and hold above 0.6000 would strengthen the continuation setup and shift attention toward the major 0.6070–0.6085 resistance zone visible higher on the chart. Clearing that barrier would expose 0.6150–0.6170 as the next potential destination.
The market is approaching resistance from a position of strength rather than exhaustion. The rising trendline remains respected, higher lows continue to develop, and former resistance levels are gradually being reclaimed. I would therefore favour a brief pullback and successful retest around 0.5950 before another attempt through 0.6000, with 0.6080 remaining the primary upside objective.
TRADE RECOMMENDATION
BUY NZD/USD
ENTRY PRICE: 0.5980
STOP LOSS: 0.5840
TAKE PROFIT: 0.6180
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