The New Zealand Dollar (NZD) is coming under increasing bearish pressure on Friday, amid a firmer US Dollar (USD), favoured by the dismal market mood. The pair trades below 0.6030 at the time of writing, after pulling back from 0.6076 highs on Thursday, drawing closer to the 0.6000 psychological level.
An AI-induced reversal in Wall Street has extended into Asian and European equity markets, triggering a risk-averse market mood that is underpinning demand for safe havens like the US Dollar. Investors, however, remain cautious ahead of the release of the US Consumer Price Index (CPI) numbers, due later in the day, which might provide further clues about the US Federal Reserve’s (Fed) easing calendar.
US CPI is expected to have remained steady at 0.3% in January, and to have eased to a 2.5% annualized growth from December’s 2.7% reading. The risk is on a sharper-than-expected decline in price pressures, which, in the light of the disappointing figures recently seen in the US, would boost hopes of immediate Fed cuts.
Technical Analysis
The 4-hour chart shows the NZD/USD retreating from Thursday’s high with a potential Double Top formation in progress. This is a common figure to anticipate trend shifts.
Technical indicators show mounting bearish pressure. The Relative Strength Index (RSI) has dropped below the key 50 level. The Moving Average Convergence Divergence (MACD) histogram shows expanding red bars, and the MACD line has crossed below the signal line, which suggests that sellers are taking control.
Support at the 0.6020 area is holding bears for now, and closing the path to the 0.6000 level and the weekly low, at 0.5997. Key support is at 0.5928, the February 6 low, and the neckline of the Double Top pattern. Immediate resistance aligns at the area between weekly highs at 0.6577 and the late January highs at 0.6095. Further up, the 2025 peak, at the 0.6120 area, would come into focus.
(The technical analysis of this story was written with the help of an AI tool.)
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
Source: https://www.fxstreet.com/news/nzd-usd-price-forecasts-drifts-below-06030-amid-mounting-bearish-pressure-202602130854
