NZD/USD Price Analysis: Can it clear the stubborn 100-SMA barrier near 0.5650 on H4?

Fresh buying supports NZD/USD as the USD weakens, but bullish conviction remains limited.
Gains in the NZD remain capped by last week’s dovish RBNZ pause, with traders closely watching Friday’s US NFP release.
Conflicting technical signals also call for caution when positioning for additional gains.

A broadly weaker US Dollar (USD) supports a second consecutive day of gains in NZD/USD on Thursday. Extending the previous day’s rebound from the 0.5575 area, a three-week low, the pair climbs to the 0.5655-0.5660 zone in early European trading, its highest level in over a week.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Post-election developments have pushed the USD Index (DXY), which measures the Greenback against a currency basket, to its lowest level since late September. Following a Democratic sweep in the US midterm elections, concerns have grown over fiscal gridlock that could constrain government spending and slow economic growth. At the same time, expectations of an end to the Iran war are dragging crude oil prices lower. The resulting easing of inflation concerns is putting pressure on US bond yields, further weakening the dollar and lending some support to NZD/USD.

For the New Zealand Dollar (NZD), however, strong follow-through demand may prove elusive after the Reserve Bank of New Zealand (RBN) delivered a major dovish surprise last week by leaving the Official Cash Rate (OCR) unchanged at 2.75%. With the crucial US monthly employment figures due on Friday, traders may also hold back from aggressive directional positions. Commonly known as the US Nonfarm Payrolls (NFP) report, the release will be an important driver of USD demand and, in turn, NZD/USD.

The short-term technical bias remains negative following the post-RBNZ breakdown and the subsequent failure near the 100-period Simple Moving Average (SMA) on the 4-hour chart. A retreat in the Relative Strength Index (14) to around 55 from recently overbought levels points to moderating bullish momentum. Although the Moving Average Convergence Divergence (MACD) histogram remains marginally positive, its flat profile signals waning upward pressure rather than a strong trend.

Positioning for a continuation of the established decline from August’s monthly swing high would therefore warrant waiting for a sustained break below, and acceptance beneath, the 0.5580-0.5570 horizontal support zone. Immediate upside resistance comes from the 100-period SMA near 0.5649, ahead of the 23.6% Fibonacci retracement at 0.5664. Only a sustained move above these hurdles would open the way to a test of the higher Fibonacci resistance levels at 0.5725 (38.2%) and 0.5775 (50%).

(The technical analysis of this story was written with the help of an AI tool. Know more.)

NZD/USD: What Does the 4-hour Chart Show?

RBNZ: Common Questions Answered

What role does the Reserve Bank of New Zealand play?

As New Zealand’s central bank, the Reserve Bank of New Zealand (RBNZ) seeks to achieve and preserve price stability while supporting maximum sustainable employment. Price stability is achieved when inflation, as measured by the Consumer Price Index (CPI), is within the 1% to 3% range.

How does monetary policy at the Reserve Bank of New Zealand affect the New Zealand Dollar?

Setting the Official Cash Rate (OCR) at a level consistent with the central bank’s objectives is the responsibility of the Reserve Bank of New Zealand’s (RBNZ) Monetary Policy Committee (MPC). If inflation exceeds the target, the bank will seek to bring it down by increasing its key OCR. This raises borrowing costs for households and businesses, cooling economic activity. By lifting yields and making the country more attractive to investors, higher interest rates generally support the New Zealand Dollar (NZD). Lower rates, by contrast, tend to weaken the NZD.

Why is employment important to the Reserve Bank of New Zealand?

A tight labour market can stoke inflation, making employment a key consideration for the Reserve Bank of New Zealand (RBNZ). The bank defines its objective of “maximum sustainable employment” as the greatest use of labour resources that can be maintained over time without accelerating inflation. The bank explains: “When employment is at its maximum sustainable level, there will be low and stable inflation. However, if employment is above the maximum sustainable level for too long, it will eventually cause prices to rise more and more quickly, requiring the MPC to raise interest rates to keep inflation under control,”

How does Quantitative Easing (QE) work?

When simply cutting interest rates is unlikely to meet its objectives, the Reserve Bank of New Zealand (RBNZ) can turn to Quantitative Easing as a last resort in extreme circumstances. Under QE, the RBNZ prints domestic currency to purchase assets, typically government or corporate bonds, from banks and other financial institutions. The purpose is to expand the domestic money supply and stimulate economic activity, and the policy usually weakens the New Zealand Dollar (NZD). The RBNZ deployed QE during the Covid-19 pandemic.