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NZD/USD Pushes Higher as U.S. Dollar Buckles Under Political Strain
Economic
Summary:
The Kiwi rallies near 0.6000 but faces looming policy headwinds from RBNZ rate cut expectations.
Buy
CLOSEDNZDUSD
End Time
0.60002
Entry Price
0.62000
TP
0.58700
SL
0.58960 -0.00090 -0.15%
348
Points
Loss
0.58700
SL
0.59654
CLOSING
0.60002
Entry Price
0.62000
TP
The New Zealand dollar continued its upward march against the US dollar on Tuesday, extending gains that began earlier this month, as mounting economic and political instability in the United States kept the greenback under pressure. The NZD/USD pair hovered near the key psychological level of 0.6000 during the early European trading session, bolstered by a combination of broad-based dollar weakness, strong domestic trade data, and technical bullish momentum. However, the rally may face near-term resistance as markets brace for a likely interest rate cut by the Reserve Bank of New Zealand (RBNZ) in May.
The current weakness in the US dollar is being driven primarily by intensifying concerns over Washington’s economic and political trajectory. A slew of recent developments has undermined investor confidence in the world’s largest economy. Chief among them is President Donald Trump’s renewed antagonism toward Federal Reserve Chair Jerome Powell, which has once again raised alarms over the central bank’s independence.
Trump’s latest barrage of criticism, delivered through his Truth Social platform, included warnings that unless the Fed slashes rates soon, the US economy could be headed for a sharp downturn. These remarks have stoked fears among market participants that the Fed could be forced into a politically motivated easing cycle, rather than one based on data-driven economic assessment.
White House economic advisor Kevin Hassett further stirred the pot by revealing that the administration is exploring legal avenues to potentially remove Powell—a move that would represent an unprecedented breach of the Fed’s autonomy and could severely damage US financial credibility.
Adding to the uncertainty are escalating trade frictions. The White House recently imposed tariffs on Chinese cargo ships docking at American ports—a decision that could disrupt global supply chains and worsen trade flows. Beijing, a major trading partner for both the US and New Zealand, has refused to back down, maintaining a hardline stance in response to Washington’s pressure tactics.
Moreover, Trump's proposal for an investigation into imports of critical minerals has sparked fears of additional tariffs, further rattling already fragile global trade dynamics. The standoff with China, especially over high-value mineral trade, has only exacerbated concerns of a protracted slowdown in global growth.
Against this backdrop of geopolitical tension, the New Zealand dollar has found some support in its robust macroeconomic fundamentals. Data released last week revealed a sharp improvement in the country’s external sector. In March, New Zealand posted a trade surplus of NZD 970 million its highest since the onset of the COVID-19 pandemic in 2020. Exports rose an impressive 19% year-on-year, while imports increased by 12%, reflecting strong domestic and international demand.
Yet, this economic strength may not be enough to keep the Kiwi buoyed for long. The RBNZ is widely expected to cut its Official Cash Rate by 25 basis points at its next policy meeting in May. Markets have already priced in a move from 3.5% to 3.25%, with further reductions anticipated later in the year, potentially bringing the rate to 2.75% by December. The dovish tilt in RBNZ policy guidance is largely in response to cooling inflation pressures and a softening housing market.
The divergence between RBNZ's easing bias and the Federal Reserve’s more hawkish posture even under political pressure could eventually weigh on the NZD, despite its current momentum.
Technical Analysis
From a technical standpoint, NZD/USD remains in an intraday bullish phase, supported by sustained trading above the 50-period Exponential Moving Average (EMA50). The pair has shown resilience since April 9, consistently posting higher lows, and managed to alleviate overbought pressures on the Relative Strength Index (RSI) without breaking trend structure.
The Kiwi recently touched a pullback support level around 0.5971, a key area that could provide another leg higher if sustained. A break below this support, however, may trigger a retracement toward the overlap support near 0.5875 a level also aligned with the 23.6% Fibonacci retracement of the recent bullish leg.
Upside targets remain intact, with the next major resistance seen at 0.6082, which coincides with the 161.8% Fibonacci extension marking a potential take-profit zone for short-term bulls.
TRADE RECOMMENDATION
BUY NZDUSD
ENTRY PRICE: 0.6000
STOP LOSS: 0.5870
TAKE PROFIT:0.6200
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