Kiwi Slides as RBNZ Caution Weighs Before Fed Decision

Key Moments

NZD Under Pressure After RBNZ’s Cautious Hike

The NZD/USD pair trades around 0.5790 in early Asian hours on Monday, with the New Zealand Dollar losing ground against the US Dollar. The move comes as investors continue to react to what has been perceived as a dovish rate increase from the Reserve Bank of New Zealand.

Earlier this month, the RBNZ lifted the Official Cash Rate by 25 basis points to 2.75%. Despite the hike, policymakers emphasized that the current level of rates is still accommodative and highlighted a focus on a “gradual removal of monetary stimulus.”

Economists broadly anticipate at least one additional rate rise before year-end, most likely in December. However, the central bank’s guarded tone and its forward guidance have cooled expectations for a more forceful tightening path, encouraging selling in the New Zealand Dollar.

Fed Meeting in Focus as Markets Reprice Rate Path

Attention now turns to the US Federal Reserve’s policy announcement on Wednesday. Following stronger-than-expected US inflation data, market positioning has shifted, with short-term interest rate futures indicating that traders now assign nearly an 86.2% probability to a 25 bps rate increase, based on the CME FedWatch tool.

Investors will scrutinize Fed Chair Kevin Warsh’s press conference for clues on the future trajectory of policy. Any unexpectedly dovish rhetoric from Warsh has the potential to undermine the US Dollar against the New Zealand Dollar in the near term.

New Zealand Manufacturing Still in Expansion Despite Cooling

New Zealand’s manufacturing sector continues to expand, although momentum has softened. BNY’s Geoff Yu notes that the manufacturing PMI

“fell to 53.1 points in August from 54.3 in July but remained above the 50-point expansion threshold for a 13th straight month, signaling continued growth in the sector.”

This ongoing expansion, even in the face of a slight easing in the headline index, highlights resilience in the country’s industrial activity amid elevated cost-of-living pressures and geopolitical challenges. That backdrop may still offer some underlying support to the Kiwi.

NZD/USD Technical Picture: Bearish Bias Persists Below Key Averages

From a technical perspective, NZD/USD remains under pressure on the daily chart. The pair is extending its retreat beneath the 100-day simple moving average and the middle simple moving average of the Bollinger Bands, both of which now serve as resistance and reinforce a bearish short-term outlook.

Spot pricing is holding just above the lower Bollinger Band, while the 14-day Relative Strength Index stands at 35.7, hovering near oversold territory. This configuration points to ongoing selling pressure, although the intensity of the downside momentum may be moderating as price action hugs the lower boundary of its recent volatility range.

On the downside, immediate support aligns with the lower Bollinger Band at 0.5782. A decisive break below that area would pave the way for a move toward the mid-0.57s. On the upside, initial resistance stands at the 100-day simple moving average at 0.5840, followed by the middle Bollinger Band at 0.5895. Only a daily close above these clustered hurdles would begin to alleviate the prevailing bearish bias, with the upper Bollinger Band near 0.6005 acting as a more distant barrier for any corrective recovery.