New Zealand Dollar slumps against US Dollar amid firm hawkish Fed bets

The New Zealand Dollar (NZD) is down 0.35%, marginally below 0.5900 against the US Dollar (USD) during the European trading session on Tuesday. The Kiwi pair weakens as the US Dollar outperforms its peers, with financial markets becoming increasingly confident that the Federal Reserve (Fed) will raise interest rates at its policy meeting this month.

As of writing, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.2% higher to near 99.60.

USD steadies as Fed pricing stays firm

Strategists at Brown Brothers Harriman note that the "USD recovered most of yesterday’s pullback" as Fed expectations remain firmly embedded in futures pricing. They highlight that "Fed funds futures price in 67% odds of a 25bps hike on September 16 and imply 60bps of tightening over the next twelve months," adding that this elevated pricing is likely to persist into the September meeting, with "the August CPI on September 11 the decisive test."

In Tuesday’s session, investors will pay close attention to the US ISM Manufacturing PMI data for August and the US JOLS Job Openings data for July, which will be published at 14:00 GMT.

Analysts at BBH see the headline reading "at 55.2 vs. 55.6 in July consistent with resilient manufacturing activity." More importantly for the policy outlook, the "Prices Paid index is seen falling to a six-month low at 70.8 vs. 71.1 in July signaling diminishing upside inflation risk."

On the labor side, BBH flags the "July Job Openings and Labor Turnover Survey (JOLTS) "is expected to reinforce the US labor market’s low hire, low fire backdrop."

According to the FXS Economic Calendar, US employers are expected to have posted 7.3 million fresh jobs, slightly lower than 7.359 million in June.

“Together, these data points are seen as key inputs for the Fed and potential drivers of further Dollar moves into the September decision,” BBH added.

On the New Zealand Dollar front, investors await the Reserve Bank of New Zealand’s (RBNZ) monetary policy decision on Wednesday.

RBNZ hike seen as fully priced, focus shifts to hawkish tone and projections

Analysts at ING expect the Reserve Bank of New Zealand to deliver a “25bp” rate increase “to 2.75%” at tomorrow’s meeting, noting that “consensus is unanimous and markets are fully pricing in the move.” With the hike largely anticipated, ING argues that the reaction in the New Zealand Dollar will hinge on the policy communication, stressing that “the impact on the New Zealand dollar will be highly dependent on whether the statement will still include firmly hawkish guidance, and on updated rate/economic projections.”

NZD/USD Technical Analysis

In the daily chart, NZD/USD trades at 0.5894, maintaining a mildly bearish near-term bias as it holds just beneath the 20-day Exponential Moving Average (EMA) at 0.5907, which acts as immediate overhead resistance. The Relative Strength Index (RSI) at 50 suggests neutral momentum after the recent pullback, hinting that directional conviction is currently driven more by the pair’s position under the short-term trend barrier than by momentum signals.

On the topside, initial resistance is defined by the 20-day EMA at 0.5907; a daily close above this level would ease downside pressure and open the path for a more sustained recovery. With no clear nearby structural supports derived from the provided data, traders may look to prior lows on the chart as potential demand zones, while the current configuration leaves NZD/USD vulnerable to further slippage as long as it remains capped below the short-term EMA.