FX.co ★ NZD/USD

The New Zealand dollar is currently the worst-performing major currency in September, down nearly 3%. The currency has faced pressure from the Reserve Bank of New Zealand's rate hike and growing geopolitical uncertainty, as the conflict between the United States and Iran remains unresolved. Despite the RBNZ hiking the Official Cash Rate by 25 basis points to 2.75%, the central bank indicated that future rate increases would be measured. As a result, some of the effects of the rate hike were offset. NZD/USD has declined more than 4% this month, and this time the US dollar has its own set of factors pushing the currency pair even lower. The Federal Reserve's strong stance and higher Treasury yields have helped the dollar gain further strength, putting pressure on NZD/USD. The drop has paused over the past couple of days, finding support at 0.5660. However, sellers seem unable to push prices below this level, whereas buyers are fighting hard to defend it—how long will this last? 0.5660 is very likely a significant support level. Based on recent responses in the daily time frame, buyers seem to be holding this level despite prevailing bearish sentiment. What remains to be seen is whether sellers can prolong the fall, break below 0.5660, and continue toward their earlier low of 0.5485. The macroeconomic context is also still favourable to keep sellers in control of NZD/USD, as US treasuries are yielding high, expectations for a further interest rate increase by the Fed in October are very high, and geopolitical tension also underpins the dollar's position. Nevertheless, the extra boost to the dollar from all these circumstances seems to be running out of steam. And since NZD/USD is already highly oversold, even a small shift in the macroeconomic situation may give buyers a chance to bounce back.