US Dollar: Lower yields pressure USD as December hike looms - Rabobank

The New Zealand Dollar weakened as the US Dollar strengthened, driven by rising Treasury yields ahead of the Federal Open Market Committee meeting minutes. US yields hovered near 5.30% for the 10-year note and 5.69% for the 30-year yield, fueled by concerns over inflation, expanding fiscal deficits, and increased AI-related debt issuance.

Rising oil prices, due to geopolitical tensions in the Middle East, added to the pressure on the New Zealand Dollar. While a stronger dollar benefits from higher oil prices and speculation of persistent rate hikes, it may face limitations. Recent soft US labor data dampened expectations for aggressive Fed tightening, with the CME FedWatch tool indicating only a 22% chance of a rate hike at the next meeting.

The Reserve Bank of New Zealand recently raised its official cash rate by 25 basis points to 2.75%, its second consecutive increase, to curb domestic inflation. Financial markets anticipate further monetary tightening, with investors watching the RBNZ's decision on October 28. NZD/USD currently trades at 0.5610, trading below both short-term and medium-term exponential moving averages, indicating a bearish near-term outlook.

The 14-day Relative Strength Index has dipped into oversold territory at 29.63, suggesting the decline may not reverse decisively in the near term. The nine-period EMA at 0.5634 and the 50-period EMA at 0.5760 provide immediate resistance and broader downtrend barriers, respectively. Downside support is defined by the oversold RSI reading, but the lack of nearby structural support leaves the currency vulnerable to further weakness.