On the first day of the new week, the NZD/USD pair is trying to attract buyers. Still, against the backdrop of cautious market sentiment and moderate strengthening of the US dollar, despite its correction, any significant recovery seems unlikely. The pair finds support around the key level of 0.6100.
The US Dollar Index, which tracks the dollar against a basket of currencies, following the Federal Reserve's aggressive stance pointing to only one rate cut this year, has risen to its highest level since May 9th.
In addition to better-than-expected Friday's US business activity index data, it continues to support the dollar. Furthermore, ongoing geopolitical tensions and political uncertainty in Europe are dampening investors' appetite for riskier assets. This is seen as another factor contributing to support for the US dollar and hindering the growth of the risk-sensitive New Zealand dollar.
Expectations that the Reserve Bank of New Zealand will cut rates earlier than previously forecasted are limiting the NZD/USD pair's upside. In fact, according to the central bank's forecast, it will wait until the third quarter of 2025 before cutting rates amid high inflation. However, after a recent economic downturn, market players expect a rate-cut cycle to begin early next year. Amid China's economic challenges, caution is advised before expecting measures to bolster antipodean currencies, including the New Zealand dollar.
Therefore, the aforementioned fundamental backdrop suggests that the path of least resistance for the NZD/USD pair is downwards.
However, traders may refrain from aggressive positions. It is worth waiting for important US macroeconomic data this week. Final GDP data for the first quarter. Also, the Personal Consumption Expenditures (PCE) Price Index. In addition, speeches by influential FOMC members could stimulate demand for the US dollar, providing some impetus to the currency pair, especially in the absence of significant US economic news affecting the market.
