[Weekly Verification ②] Week of Aug 25, '25 “NZD/USD Story”
I trade the following currencies: USDJPY, EURUSD, EURJPY, GBPUSD, GBPJPY, AUDUSD, AUDJPY, NZDUSD, and NZDUSDJPY.
The market after the FOMC is feeling chaotic.
Is the dollar strong or weak?
The cross-yen pairs also look like they want to go up but don't...
In such a difficult atmosphere, I decided to focus on NZD/USD.
Reason for Selection
Looking at the daily chart for NZD/USD, it recently formed a long bullish candle, which at first glance makes one think, 'Is the uptrend resuming?'
However, the story unfolding behind that was different.
The RBNZ (Reserve Bank of New Zealand) stated that there is 'room for additional rate cuts.'
On the other hand, the FRB (Federal Reserve Board) is maintaining high interest rates.
In other words, perhaps the market sentiment is something like this:
'The appeal of the NZ dollar is declining... the interest rate gap with the dollar may widen further.'
This trend might become a force pulling NZD/USD back down.
Organizing the Mechanism: Why NZD/USD Falls
Let me organize my thoughts regarding the interest rate gap.
1. When the RBNZ cuts rates...
→ NZ policy rates fall
→ The benefit of holding NZ dollars (= interest income) decreases
2. Investor psychology
→ 'Currencies with higher interest rates are more attractive, right?'
→ Sell NZ dollars and buy higher-yielding US dollars
3. As a result
→ NZ dollars become easier to sell, and NZD/USD is prone to falling
Because of this background, I thought that a 'scenario of returning downward' for NZD/USD is likely to be on investors' minds.
Story
Currently, NZD/USD is drifting around 0.5866.
Just below that is an important support line at the recent low of 0.5799.
If it breaks below this, there is a possibility that the market could drop sharply.
In the 'lost market' following the FOMC, NZD/USD is showing one clear scenario.
'RBNZ dovish stance → NZD appeal wanes → Acceleration if recent lows are broken'
Preview of next week's verification
Will the RBNZ continue its stance of further easing?
How will the maintenance of high U.S. dollar interest rates and the weakness of the NZ dollar intersect?
The biggest highlight will be whether or not it breaks below 0.5799
Next week, we will focus our verification on 'whether or not NZD/USD breaks through support'.
Look forward to next weekend!
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