NZD/USD Price Forecast: Finds bids below 61.8% Fibo retracement
- NZD/USD claws back half of its early losses against the US Dollar.
- The US Dollar trades firmly ahead of the Fed’s monetary policy announcement on Wednesday.
- Investors expect the Fed to hike interest rates by 25 bps to 3.75%-4.00%.
The New Zealand Dollar (NZD) recovers half of its early losses against the US Dollar (USD), but is still 0.17% down at around 0.5770 during the European trading session on Tuesday. The Kiwi pair is broadly under pressure as the US Dollar outperforms, with financial markets remaining increasingly confident that the Federal Reserve (Fed) will hike interest rates in the policy meeting on Wednesday.
At press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.15% higher to near 99.62.
Economists at ING explain that they have "changed our view to a 25bp Federal Reserve rate hike in September in the wake of Chair Kevin Warsh’s address at the Jackson Hole symposium," adding that "the data since then has justified that decision."
Regarding the Fed remaining on the monetary tightening path, ING said that while it acknowledges "ordinarily the assumption is that if the Fed hikes, they don’t just go once," and that "financial markets are now pricing two and a half further rate hikes after the all-but-assured 16 September move," it thinks this time to be “one and done be the case," with their projections for jobs and inflation suggesting "no need for a series of hikes."
NZD/USD Technical Analysis
In the daily chart, NZD/USD trades at 0.5769, retaining a bearish near-term tone as it holds below the 20-day Exponential Moving Average (EMA) at roughly 0.5854 and below the mid-Fibonacci retracement band around 0.5808. The Relative Strength Index (RSI) at about 33 hovers near oversold territory, suggesting downside momentum persists but could be at risk of fatigue if sellers press too aggressively from current levels.
On the topside, initial resistance emerges at the 50.0% Fibonacci retracement near 0.5808, followed by a dense cluster around 0.5850–0.5854 where the 38.2% retracement and the 20-day EMA converge, before the 23.6% level at 0.5903. On the downside, immediate support aligns with the 61.8% retracement at 0.5765, with further cushions seen at the 78.6% level around 0.5705 and the prior swing base near the 100% retracement at 0.5628; a sustained break below these floors would reinforce the broader bearish bias.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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