New Zealand Dollar remains depressed around 0.5650, near June lows vs bullish USD

• NZD/USD remains under some selling pressure for the third straight day amid a bullish USD.
• Rising Fed hike bets, elevated bond yields and geopolitical risks continue to benefit the buck.
• The RBNZ’s dovish outlook backs the case for an extension of the pair’s one-month-old slide.

The NZD/USD pair attracts sellers for the third straight day, flirting with its lowest level since late June, around mid-0.5600s during the Asian session on Friday. Spot prices remain on track to register losses for the fifth straight week and seem vulnerable amid a bullish US Dollar (USD).

In fact, the USD Index (DXY) shot to a nearly two-month high on Thursday amid rising Federal Reserve (Fed) rate hike bets and surging US bond yields. According to CME Group's FedWatch Tool, traders are currently pricing in an over 65% chance that the US central bank will raise borrowing costs again in October following the widely expected 25 basis points (bps) hike earlier this month. The expectations were reaffirmed by the recent hawkish comments from several Fed officials.

Adding to this, inflation risks stemming from elevated oil prices underpin prospects for further Fed tightening and lift the yield on the benchmark 10-year US Treasury to a fresh high since July 2007. Moreover, the uncertainty over how and when the US-Iran conflict could end keeps the geopolitical risk premium in play and suggests that the path of least resistance for the safe-haven Greenback remains to the upside. This validates the near-term negative outlook for the NZD/USD pair.

Meanwhile, US Treasury Secretary Scott Bessent told Fox News the US-China trade truce would be extended until January 10. This, however, does little to provide any meaningful impetus to antipodean currencies, including the Kiwi, while the Reserve Bank of New Zealand's (RBNZ) dovish outlook backs the case for an extension of an over one-month-old downtrend. Traders now look to US macro data and Fed speeches for some impetus later during the North American session.

NZD/USD daily chart

Technical Analysis

The NZD/USD pair seem poised to extend its downtrend towards the year-to-date low, around 0.5625, touched in June. A convincing break below will be seen as a fresh trigger for bearish traders and pave the way for further losses.

On the topside, any attempted recovery is more likely to attract fresh sellers and remain capped near the 0.5700 mark. The next relevant hurdle is pegged ahead of mid-0.5700s, which, if cleared, should set the stage for some meaningful recovery.

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