Kiwi Climbs as Dollar Slips, But Local Risks Keep Rally in Check

Key Moments

Dollar Slide Supports NZD/USD

NZD/USD strengthened for a second consecutive session, changing hands near 0.5650 during Asian hours on Thursday. The move higher came as the US Dollar (USD) encountered heavy selling pressure after a Democratic victory in the US midterm elections delivered control of both chambers of Congress, fueling concerns about potential legislative deadlock in Washington.

At the same time, market expectations that the conflict in the Middle East could be resolved relatively quickly pressured crude oil prices sharply lower, adding to the downside in the Greenback and lending support to the New Zealand Dollar.

Solid US Data Keeps Fed December Hike in Play

Despite the setback in the currency, the fundamental backdrop for the USD remained underpinned by resilient US data. The ADP employment report showed that private payrolls rose by 86,000 in October, topping the 69,000 consensus forecast, even though September’s reading was revised down to 86,000 from 90,000.

Separately, the ISM Services PMI eased to 54.5 from 54.9, slightly below the 54.8 projection, but still firmly in expansion territory. Taken together, these releases maintained a hawkish policy outlook.

According to the CME FedWatch Tool, market participants continued to price in nearly an 82% probability of another Federal Reserve rate increase in December. Attention is now turning to upcoming US data, including weekly Initial Jobless Claims on Thursday and the Nonfarm Payrolls (NFP) report on Friday, for further guidance on the policy path.

Domestic Factors Cap New Zealand Dollar Upside

While external dynamics supported NZD/USD, the pair’s upside remained constrained by New Zealand-specific developments. The latest labor market figures prompted investors to scale back expectations for a Reserve Bank of New Zealand (RBNZ) rate increase in December, with market-implied odds slipping below 50%, down from around 75% earlier in the week.

Political risk is also in focus as New Zealand’s general election approaches on Saturday. Opinion surveys indicate a close race between the incumbent center-right National-led coalition and opposition parties headed by Labour, injecting an additional layer of uncertainty for the Kiwi.

Technical Picture: Bearish Bias Persists Despite Short-Term Stabilization

On the daily chart, NZD/USD is trading near 0.5650 and continues to exhibit a bearish near-term structure, with spot prices holding beneath the 50-day Exponential Moving Average (EMA). This positioning keeps the broader downtrend intact.

However, the pair is currently trading just above the nine-day EMA, signaling an attempt to stabilize after prior declines. The 14-day Relative Strength Index (RSI) has rebounded toward the neutral 47.8 region, indicating that selling pressure is no longer stretched, though upward momentum remains limited.

On the topside, initial resistance is located at the 50-day EMA at 0.5693. A daily close above this level would be required to meaningfully reduce prevailing downside pressure and open the door to a more sustained recovery. On the downside, the nine-day EMA at 0.5638 acts as nearby support. A break beneath that area would likely invite renewed selling and reinforce the broader bearish setup, with momentum still only modestly negative.