The NZD/USD pair is declining for the fourth consecutive day, extending its weekly downtrend and dropping to the 0.5755 level, setting a new low not seen since November 2022.

The New Zealand dollar continues to underperform due to the Reserve Bank of New Zealand's (RBNZ) aggressive monetary easing and concerns about the recovery of the Chinese economy.

On the other hand, the U.S. dollar consolidates its recent gains, reaching a new monthly high and exerting additional downward pressure on the NZD/USD pair.

Key Drivers:

1. U.S. Inflation Data: This week's CPI (Consumer Price Index) and PPI (Producer Price Index) reports revealed that progress toward the Federal Reserve's 2% inflation target has effectively stalled. Combined with expectations that expansionary policies under President Trump could drive inflation higher, this suggests that the Federal Reserve might adopt a more cautious stance on rate cuts in the future.
2. U.S. Treasury Yields: Expectations for a less dovish Fed policy continue to support further increases in U.S. Treasury yields, acting as a tailwind for the U.S. dollar.
3. Geopolitical Risks: Ongoing geopolitical tensions, including the prolonged Russia-Ukraine conflict, Middle East instability, and renewed fears of a trade war with China, further bolster the U.S. dollar as a safe-haven currency. These developments contribute to capital outflows from the risk-sensitive New Zealand dollar.
4. RBNZ Policy and China Concerns: The RBNZ's dovish stance and uncertainties surrounding the recovery of the Chinese economy add to the bearish sentiment for the kiwi.

Market Outlook:

On Friday, there are no major U.S. economic data releases expected to drive market movements, leaving the NZD/USD pair under the influence of USD price dynamics. However, the aforementioned fundamental backdrop suggests that the path of least resistance for spot prices remains downward.

Traders are likely to remain cautious ahead of the FOMC's critical monetary policy meeting next week. Oscillators on the daily chart are also nearing oversold territory, indicating that a further sharp decline may be limited in the near term.

Key Levels to Watch:

• Support: The 0.5750 level serves as immediate support, with potential for a deeper move toward lower levels if breached.
• Resistance: Any rebound would face resistance around the 0.5800 and 0.5850 levels.