New Zealand Dollar languishes near two-month low vs USD as bears await break below 0.5700

The New Zealand Dollar (NZD) struggled to hold steady near a two-month low against the US Dollar (USD) as bears remained watchful for a break below 0.5700 during Monday's Asian trading session. The NZD/USD pair traded within the 0.5720-0.5715 range, close to a low not seen since last week. New Zealand's Reserve Bank of New Zealand (RBNZ) had opted for a dovish interest rate hike amid sluggish domestic growth, while the US Federal Reserve (Fed) maintained a more hawkish stance.

This led to an increased appeal for the US Dollar (USD), weighing down the NZD/USD pair. Economists at Nordea pointed out that the US economy displayed "resilience," with inflationary pressures showing "little sign of easing," and the labor market remaining "strong." Nordea forecasted two more rate hikes from the Fed but cautioned that the risks were tilted to the upside, as the Fed might need to act more aggressively than anticipated.

Geopolitical tensions in the Middle East continued to support the safety of the USD, with Iran-backed Houthis attacking Saudi Arabian targets and Iran outlining several conditions for resuming negotiations with the US. Oil prices dropped to a one-week low due to a recovery in shipments from Saudi Arabia, helping to ease concerns about runaway inflation and keeping US bond yields below multi-year highs.

Traders remained cautious ahead of a high-profile meeting between US President Donald Trump and Chinese President Xi Jinping, which could reignite interest in Asian currencies, including the NZD. The NZD/USD pair appeared bearish in the short term, waiting for a break below the 78.6% Fibonacci retracement level near 0.5700, which would expose a deeper support level around 0.5624.

Should the pair move higher, the next resistance levels would be the 61.8% Fibonacci retracement near 0.5763 and the 50.0% level at 0.5806. Above these, traders would face a strong barrier formed by the 38.2% retracement at 0.5849 and the 200-day Simple Moving Average (SMA) at 0.5853, before encountering the 23.6% level at 0.5902 and the recent peak near 0.5988.