The NZD/USD pair regained much of its early-session losses on Monday, rebounding toward the 0.5965 mark during the early European hours. While the pair is inching closer to its intraday high, it continues to trade within the broader range established on Friday, suggesting caution for traders looking for a breakout.
USD Softens Amid Mixed Fed Signals
The US Dollar (USD) started the week on a weaker footing, retreating from its highest level since June 23. Market sentiment remains uncertain following mixed cues from Federal Reserve officials. Notably, Fed Governor Christopher Waller expressed support last week for a potential rate cut as early as July, which has tempered USD strength and boosted risk-sensitive currencies like the New Zealand Dollar.
Risk Sentiment Supports Kiwi, but Caution Persists
The generally upbeat risk tone in global markets is also helping the Kiwi find some support. However, market expectations that the Fed will maintain elevated interest rates for longer — particularly in light of rising consumer prices linked to higher import tariffs — continue to limit the downside in the US Dollar. Additionally, concerns over the economic impact of President Trump’s unpredictable trade policies remain a key risk factor.
Outlook: Watch for Follow-Through and Data Later This Week
Despite the pair’s intraday recovery, NZD/USD remains within a well-defined range, and a lack of fresh catalysts on Monday could keep the pair directionless in the short term. Without any key US data releases scheduled for the day, traders are likely to look ahead to global flash PMIs later this week for new trading opportunities.
In the near term, a decisive move beyond the recent range highs would be needed to confirm a stronger bullish bias, while downside risks could re-emerge if sentiment shifts back in favor of the USD.
