Why is the New Zealand Dollar retreating from 0.5660 as the US Dollar recovers?

• NZD/USD holds on to gains near 0.5630 despite pulling back from the session high of 0.5658.
• US NFP figures move into focus for investors.
• The US economic outlook faces uncertainty after Democrats secure control of both the House and the Senate.

Early gains in NZD/USD have halved on Thursday, although the New Zealand Dollar (NZD) remains higher against the US Dollar (USD). During European trading, the pair is up 0.2% near 0.5630, having eased from the session high of 0.5658.

A recovery in the US Dollar, which has moved into positive territory, is weighing on the Kiwi pair. Meanwhile, financial markets are turning their attention to October's United States (US) Nonfarm Payrolls (NFP) report, due on Friday.

Having retested the monthly low of 101.01 recorded the previous day, the US Dollar Index (DXY) has staged a strong rebound. The index, which tracks the Greenback against six major currencies, is trading 0.1% higher near 101.60 at the time of writing.

For fresh indications of the Federal Reserve's (Fed) monetary policy outlook, investors will closely scrutinise the US NFP release.

Could the Fed still hike as TD forecasts subdued October job growth?

Modest hiring is likely in October's US employment report, according to TD Securities. Its economists expect nonfarm payrolls to “remain subdued at 40k after job gains moderated to 29k in September.” The bank argues that the headline figure may understate the underlying momentum, noting that, “despite the subdued, below-consensus print, our forecast would be within the range of breakeven job gains and result in an increase in the three-month moving average,”. There is also scope for a stronger outcome: TD says “risks to our payrolls forecast are to the upside,” and cautions that “seasonal factors could reverse again more than expected and lead to a stronger print.” With “underlying activity in the economy robust and inflation risks still prominent,” the bank's conclusion is that “a hike in December is likely.”

Before its recovery, the US Dollar had lagged as the Democrats' victory in the US midterm elections cast uncertainty over the economic outlook.

Could US political tensions weigh on the Dollar into 2027?

US political developments could pose another medium-term challenge for the Dollar, according to analysts at ING. In their assessment, “the dollar could see a little more weakness into 2027, however, if an emboldened Democratic Party takes greater issue with Republican policy, including deregulation and the AI build-out.” The analysts also say that “the potential for a prolonged government shutdown in mid-2027 adds to the case for a weaker dollar next summer,” supporting their view that intensifying political tensions may increasingly erode the currency's appeal.

NZD/USD Technical Analysis: Can the Pair Clear Its Short-Term EMA?

Trading at 0.5631 on the daily chart, NZD/USD retains a bearish short-term bias below its 20-day exponential moving average (EMA) of 0.5646. This nearby dynamic resistance continues to limit the pair, implying that rallies may struggle while it remains below the average. The Relative Strength Index (RSI), however, is recovering towards the mid-40s, signalling that downside pressure is easing but remains modest.

A daily close above initial resistance at the 20-day EMA of 0.5646 would be required to soften the bearish tone and create scope for a corrective rise. The supplied indicators do not identify clear support levels close below the current price. Traders may therefore refer to recent chart lows for potential demand zones, while recognising that the downside bias persists as long as NZD/USD remains beneath its short-term EMA.

(The technical analysis of this story was written with the help of an AI tool. Know more.)