Forex News
- NZD/USD attracts some follow-through buyers as Iran diplomacy hopes weigh on the USD.
- Traders, however, seem hesitant and opt to wait for the release of the US inflation figures.
- The constructive technical setup backs the case for a breakout through a confluence hurdle.
The NZD/USD pair turns positive for the second straight day on Tuesday, trading around the 0.5635 region during the early European session and looking to build on the previous day's strong recovery from April 2025 lows, touched last week. Traders, however, seem hesitant and await the release of the latest US consumer inflation figures before placing fresh directional bets.
The crucial US Consumer Price Index (CPI) report will be looked at for more cues about the Federal Reserve's (Fed) future policy path, which, in turn, will play a key role in influencing the US Dollar (USD) and provide a fresh impetus to the NZD/USD pair. In the meantime, hopes for Iran diplomacy counter December Fed hike bets and undermine the safe-haven buck, though the Reserve Bank of New Zealand's (RBNZ) dovish tilt keeps a lid on any meaningful upside for the Kiwi.
From a technical perspective, the NZD/USD pair trades beneath a tight cluster of resistance near the 0.5640-0.5645 area – comprising the 100-period Simple Moving Average (SMA) on the 4-hour chart and the 61.8% Fibonacci retracement, which forms a nearby ceiling. Meanwhile, momentum indicators are constructive, with the Relative Strength Index hovering around 61 and the Moving Average Convergence Divergence (MACD) line in positive territory and rising.
The broader setup, in turn, hints that buyers retain some control but still need to clear overhead barriers to reassert a clearer bullish trend. The next relevant hurdle is aligned at the 78.6% level around 0.5673 and the recent high area near 0.5712. A sustained break above this stacked band would be seen as a fresh trigger for bulls and pave the way for further gains.
On the downside, initial support emerges at the 50.0% Fibo. level around 0.5620, followed by the 38.2% retracement near 0.5599, which together define a short-term demand zone. A deeper pullback would expose the 23.6% retracement at 0.5572, ahead of the swing low anchor near 0.5528.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
NZD/USD 4-hour chart
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
- The US Dollar trades lower ahead of the US CPI data for October.
- US President Trump signals fresh order of military attacks on Iran are highly unlikely.
- Lower oil prices have kept the US Dollar under pressure.
The US Dollar (USD) is broadly under pressure against its peers amid lower oil prices due to United States (US)-Iran deal hopes.
In the European session on Tuesday, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, holds onto its previous day’s losses near 101.67. Meanwhile, the WTI Oil price has posted a fresh 10-week low near $84.20.
Analysts at MUFG said in a note that investor optimism has been buoyed by a softer tone from Washington over the weekend, after President Donald Trump told CNN it is “highly unlikely” he will need to order fresh military strikes on Iran if talks continue to show progress.
However, MUFG cautioned that US President Trump also stressed the outcome still hinges on the quality of any deal, stating that “it depends on whether or not they sign a very strong agreement,” a nuance the bank sees as crucial for sustaining the recent pullback in geopolitical risk premia.
Lower oil prices result in an erosion in the appeal of currencies from economies, such as the US, which are bet energy exporter.
On the domestic front, investors keenly await the US Consumer Price Index (CPI) data for October, which will be published at 13:30 GMT.
Fed focus turns to inflation spillovers as core CPI surprises ease
Analysts at MUFG/BTMU highlight that both market participants and the Fed will be watching this week’s US inflation release “closely for evidence of spillover effects from higher energy prices.” They note that “recent core CPI readings have surprised to the upside over the last couple of months,” which has in turn “putting pressure on the Fed to tighten policy.” However, MUFG/BTMU point out that the immediate risk may be moderating, as “consensus expectations are looking for a softer core CPI print of 0.2%M/M in October,” suggesting some scope for inflation momentum to cool even as policymakers remain alert to energy-related pass-through.
US Dollar Index Technical Analysis
In the daily chart, Dollar Index Spot trades at 101.65, keeping a neutral tone as it trades close to the 20-period exponential moving average (EMA) at 101.79.
The Relative Strength Index (RSI) near 49 hints at neutral momentum that does little to offset the current structural pressure.
The formation of the Bullish Flag chart pattern suggests that the neutral trend is a calm before the next bull move, which is historically seen in the pattern.
On the topside, immediate resistance is seen at the 20-EMA around 101.79, followed by the reclaimed trend-line zone near 102.20, where sellers could look to defend the broader corrective structure. A break above the corrective structure would increase the likelihood that the index could revisit its yearly high near 103.00.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
- EUR/USD edges up on Tuesday, reaching levels near 1.1230, after bouncing from 1.1137 on Monday.
- Oil prices have dropped about 20% in the last week, providing important relief to Eurozone economies.
- Investors are wary of selling the USD on Tuesday, ahead of the release of the US CPI report.
The Euro (EUR) edges up against the US Dollar (USD) on Tuesday, holding gains from a sharp rebound on Monday, with traders bidding their time, ahead of the release of US Consumer Price Index (CPI) figures due later in the day. The EUR/USD pair is trading just below 1.1230 at the European session opening times, after bouncing from 1.1137 lows on Monday.
The common currency has drawn support from a risk-on market at the week opening, as reports of advances in the diplomatic efforts to bring the Middle East conflict to an end have pushed Oil prices to fresh two-month lows.
Beyond thst, US President Donald Trump discarded any attack on Iran while negotiations continue, which contributed to improving market sentiment. Against this backdrop, Brent Oil has dropped more than 20% in the last week, providing important relief to the Eurozone’s Oil-importing economies.
Investors' focus turns to the US CPI release with Fed policy in the background
Market volatility, however, has eased on Tuesday, as investors brace for the release of US CPI figures. The report will miss year-on-year figures this time, amid a lack of data due to the 2025 Federal Government shutdown, and monthly figures are expected to show a slowdown in price pressures.
These figures follow an upbeat US labour market report last Friday, which showed outstanding growth in net employment in October. Before that, Gross Domestic Product (GDP) figures revealed that the economy grew at a 3.4% annualised rate in the third quarter. All in all, an ideal scenario for the Federal Reserve (Fed) to tighten its monetary policy further over the coming months.
Strategists at Brown Brothers Harriman observe that the Dollar "pared back some of Friday’s strong October non-farm payrolls gains,” although they note that the broader backdrop remains constructive for the greenback, as “robust US economic activity, favorable labor market conditions and sticky underlying inflation back the Fed’s hawkish bias, keeping rate differentials supportive of USD.”
(This story was corrected on November 10 at 06:40 GMT to say that October's US CPI will only release monthly figures, due to the 2025 Federal Government shutdown .)
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
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