The New Zealand dollar is gaining strength as traders react to positive economic news at home and growing uncertainty abroad. A strong trade performance has boosted confidence in the local economy, while a softer US dollar is giving the Kiwi room to climb. As market expectations shift, attention now turns to upcoming policy signals and fiscal announcements that could influence the next move in NZD/USD.
The New Zealand dollar advanced towards USD 0.594 on Wednesday, lifted by a retreat in the US dollar and renewed optimism following robust April trade figures.
The Kiwi rallied as much as 0.5% intraday, briefly testing resistance near 0.5948, supported by both technical strength and solid fundamentals.
April’s trade data significantly beat expectations, with New Zealand recording a surplus of NZD 1.43 billion—its strongest April performance in several years. This marked a sharp turnaround from a marginal deficit of NZD 0.01 billion in the same period last year.
Exports soared by 25% year-on-year, led by agricultural and forestry products, while imports rose by just 1.8%.
This stronger-than-expected trade balance has led traders to reassess their Reserve Bank of New Zealand (RBNZ) outlook. While a 25 basis point rate cut remains the base case for next week, expectations for deeper easing have eased.
The year-end terminal rate is now forecast at 2.83%, notably higher than previous estimates closer to 2.5%.
The Kiwi’s strength is also being underpinned by a broad-based US dollar decline, triggered by softening US economic data and growing concerns over fiscal sustainability after Moody’s downgrade.
Traders are increasingly doubtful that the Federal Reserve can maintain elevated rates in the face of rising domestic pressures.
In short-term trading, NZD/USD broke out of its intraday consolidation, touching a new local high of 0.59493, just below the psychologically significant 0.5950 level.
The pair has been carving out a pattern of higher lows since rebounding from 0.58942, signalling bullish momentum.
Price action remains above all three short-term moving averages (5, 10, and 30), with the 5-period MA pointing sharply upwards—a strong indicator of upward pressure.
The MACD histogram continues to expand in positive territory, while the signal line lags behind, suggesting further upside may be on the cards.
Should NZD/USD break and close above the 0.5950 threshold with volume, the next resistance zone lies around 0.5970–0.5980.
Immediate support is seen at 0.5925, with a more substantial floor near 0.5900 in case of a reversal.
Despite the recent bullish trend, the outlook remains cautious ahead of Thursday’s government budget announcement, which is expected to signal a more restrained fiscal policy.
Any aggressive tightening could curb domestic demand and reinforce a dovish stance from the RBNZ.
Until further clarity emerges, upside potential for the NZD/USD pair looks promising but remains susceptible to shifts in global risk sentiment or unexpected signals from the central bank.
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